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From Wikimedia Commons, the free media repository. See also category: Economic statistics. indifference curve. microeconomic graph; connects points representing different quantities of 2 goods, points between which a consumer is indifferent: i.e. the consumer doesn't prefer one combination or bundle of goods over another combination on the same ...
When the slope of the indifference curve is greater than the slope of the budget line, the consumer is willing to give up more of good 1 for a unit of good 2 than is required by the market. Thus, it follows that if the slope of the indifference curve is strictly greater than the slope of the budget line:
The slope of an indifference curve is the negative of the ratio of the marginal utility of X over the marginal utility of Y. To see this, imagine that the quantities of X and Y change by small amounts. The change in utility specified in Equation 1 can then be expressed mathematically as. 3. dU = ∂U (X , Y)/∂X dX + ∂U (X , Y)/∂Y dY = ∂ ...
Given a budget line of B1, the consumer will maximise utility where the highest indifference curve is tangential to the budget line (20 apples, 10 bananas) Given current income – IC2 is unobtainable. IC3 is obtainable but gives less utility than the higher IC1. The optimal choice of goods can also be shown with the Equi-marginal principle.
Mar 23, 2002 · move to sidebar hide. Navigation Main page; Contents; Current events; Random article; About Wikipedia
The Indifference Map refers to a set of Indifference Curves that reflects an understanding and gives an entire view of a consumer’s choices. The below diagram shows an indifference map with three indifference curves. Here, we understand that all three products resting in the indifferent curve give him the same satisfaction.
Right graph: With fixed probabilities of two alternative states 1 and 2, risk averse indifference curves over pairs of state-contingent outcomes are convex. In economics and finance , risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter ...
