What is an indifference curve?
An indifference curve is a graphical and representational combination of two goods that offers equal consumer satisfaction on consumption, thereby making the consumer indifferent. The consumer derives the same utility along the curve for any combination. It is a tool of microeconomics to demonstrate consumer preferences and the limitations of the budget. Indifference curve analysis reckons that all other variables are constant and stable. The slope of the indifference curve is well-known as the marginal rate of substitution. The insignificant rate of substitution is the rate at which the consumer is pleased to give up one good for another.
Understanding indifference curves
Indifference curves are graphical representations of a consumer's preferences for different combinations of goods. Each point on an indifference curve shows a bundle of goods that gives the consumer the same level of satisfaction. Indifference curves have three main properties: downward-sloping, do not cross, and are convex to the origin.
Example of indifference curves:
If a consumer likes apples and bananas, an indifference curve might show that they are equally happy with 2 apples and 4 bananas, 3 apples and 3 bananas, or 4 apples and 2 bananas. The indifference curve's shape depends on the consumer's preferences and how the goods are related to each other.