There are four important properties of Indifference Curve;
Property I: Indifference curves slope downward:-
This property suggests that an indifference curve has a negative drop.
This property follows from supposition I. Indifference curve existence downward sloping means that when the amount of one good in the combination is augmented, the quantity of the other good is bargain. This must be so if the level of consummation is to remain the same on an indifference curve.
If, for example, the quantity of good X is increased in the mixture, while the quantity of good Y remains unaffected, the new combination will be better to the unique one and the two combinations will not therefore lie on the similar indifference curve provided more of a product gives more consummation.
Property II: Indifference curves are convex to the origin:-
Another significant property of indifference curves is that they are habitually convex to the origin. In additional words, the indifference curve is comparatively flatter in its rightward portion and comparatively steeper in its leftward portion. This property of indifference curves follows from assumption 3, which is that the marginal rate of substitution of X for Y reduces as more and more of X is substituted for Y.
When the indifference curve is convex to the origin, MRS reduces as more of X is replaced for K. We thus conclude that indifference curves are usually convex to the origin. Our assumption concerning diminishing MRS and the convexity of indifference curves is built upon the thought of concrete behavior of the normal customer. If indifference curves were concave or straight lines, the customer would yield to monomania, that is, he would purchase and consume only one good. We know that buyers in actual world do not usually purchase and consume one good. It is for this motive that we discard indifference curves of concave or straight-line shapes and adopt that indifference curves are usually convex to the origin.
The quantity of convexity of an indifference curve depends on the rate of decrease in the marginal rate of substitution of X for Y. As indicated above, when two goods are perfect substitutes of each other, the indifference curve is a straight line on which marginal rate of substitution remains continuous. The well substitutes the two goods are for each other, the closer the indifference curve methods to the straight line so that when the two things are perfect substitutes the indifference curve is a straight line.
Property III: Indifference curve cannot intersect each other:-
Third significant property of indifference curves is that they cannot cross each other in additional words only one indifference curve will pass over a point in the indifference map 1 his property can be simply proved by first making the two indifference curves intersect each other and then showing the irrationality or self-contradicting result it leads to.
In Fig. 8.5 two indifference curves are shown intersect each other at point C. Now take point on IC2 and point B on indifference curve IC1 steeply below A. Since indifference curve signifies those mixtures of two commodities which give equal consummation to the customer the combinations signified by points A and C will give equal satisfaction to the customer because both lie on the same indifference curve IC2.
Similarly, the mixtures B and C will give equal satisfaction to the customer; both being on the similar indifference curve IC1. If mixture A is equal to combination C in terms of satisfaction, and mixture B is equal to combination C, it follows that the mixture A will be equal to B in terms of satisfaction. But a peek at Fig.8.5 will show that this is ridiculous assumption since combination A comprises more of good Y than combination B, while the quantity of good X is the similar in both the combinations.
Therefore, the buyer will absolutely favor A to B, that is, A will give more satisfaction to the customer than B. But the two indifference curves intersect each other lead us to a ridiculous assumption of a being equal to Bin terms of satisfaction. We consequently conclude that indifference curves cannot cut each other.
Another point which is value stating in this regard is that indifference curves cannot even encounter or touch each other or be tangent to each other at a point. The gathering of two indifference curves at a point will also lead us to a ridiculous conclusion. The same quarrel holds good in this case as developed overhead in the case of connection of indifference curves.
Property IV: Higher indifference curve indicates a higher satisfaction level than a lower indifference curve:-
The last property of indifference curve is that a higher indifference curve will signify a higher level of satisfaction than a lower indifference curve. In additional words, the mixtures which lie on a higher indifference curve will be favored to the mixtures which lie on a lower indifference curve. Consider indifference curves IC1and indifference curves IC2 in Fig. 8.6. IC2 is a higher indifference curve than indifference curve IC1. Mixture Q has been taken on a higher indifference curve indifference curve IC2 and mixture S on a lower indifference curve IC1.
Mixture Q on the higher indifference curve IC2 will give a customer more satisfaction than mixture S on the lower indifference curves IC1 because the mixture Q comprises more of both goods X and Y than the mixture S. Hence the customer must favor Q to S. And by transitivity supposition, he will favor any other mixture such as mixture R on IC2 to any mixture on IC1 We, consequently, determine that a higher indifference curve signifies a higher level of satisfaction and mixtures on it will be favored to the mixtures on a lower indifference curve.
August 16, 2017