Indifference Curve Theory:

Basic Concepts

The indifference curve theory of consumer behaviour is a graphic derivation of demand curves for goods and services.   The concepts which are germane to the explanation of the theory are highlighted in this sub-section.

Budget Line

It is a line showing maximum combination of two goods that the consumer can afford,  given  money  income  (i.e.  consumer's  budget)  and  the  prevailing  market prices of the two goods.