Introduction
In modern (ordinal) theory of consumer behaviour, the concept of indifference curve plays a central role. Unlike the earlier cardinal utility approach, which assumes that utility can be measured in absolute numbers (utils), the indifference curve approach assumes only that the consumer can rank different bundles of goods according to preference. This makes the analysis more realistic and is widely used in contemporary microeconomics.
For Panjab University B.Com Semester I, students are expected to give a precise definition of indifference curve, construct an indifference schedule and diagram, and then systematically explain its main properties, such as downward slope, convexity to the origin, non-intersection and the meaning of higher curves. The answer below follows the style and depth of T.R. Jain & V.K. Ohri, Microeconomics, as prescribed for your syllabus.
Meaning and Definition of Indifference Curve
Consider a consumer who consumes two goods, say X and Y (for example, X = tea, Y = biscuits). He can choose among different combinations (bundles) of X and Y. Some combinations may give him more satisfaction than others, while a few combinations may give him exactly the same level of satisfaction.
An indifference curve is a locus of all those different combinations of two goods which yield the same level of satisfaction to the consumer. The consumer is indifferent among all such combinations because each of them is equally satisfactory to him.
Thus, every point on an indifference curve represents a particular bundle of X and Y which provides identical utility to the consumer. He has no reason to prefer one point on the same curve over another.
Indifference Schedule (Illustration)
The concept can first be expressed with the help of an indifference schedule. Suppose a consumer is choosing between commodity X (say, units of tea) and commodity Y (say, units of biscuits). The following hypothetical combinations all give him the same level of satisfaction:
| Combination | Commodity X (units) | Commodity Y (units) | Level of Satisfaction |
|---|---|---|---|
| A | 1 | 9 | Same satisfaction |
| B | 2 | 7 | Same satisfaction |
| C | 3 | 5 | Same satisfaction |
| D | 4 | 3 | Same satisfaction |
| E | 5 | 2 | Same satisfaction |
Here, combination A (1, 9), B (2, 7), C (3, 5), D (4, 3) and E (5, 2) all yield the same utility. If these points are plotted on a graph and joined smoothly, we obtain an indifference curve.
Indifference Curve Diagram
In the indifference curve diagram, quantity of good X is measured on the horizontal axis and quantity of good Y on the vertical axis. Joining combinations A, B, C, D and E we get a typical downward sloping, convex indifference curve.
Properties of Indifference Curves
On the basis of the consumer’s behaviour and underlying assumptions of ordinal utility theory, indifference curves possess certain well-defined properties. The main properties usually discussed in B.Com Semester I (as in T.R. Jain & V.K. Ohri) are the following:
1. Indifference Curves Slope Downwards from Left to Right
An indifference curve is negatively sloped. This means that if the quantity of good X increases, the quantity of good Y must decrease so that the consumer remains at the same level of satisfaction.
The reason is that both goods are assumed to be “goods” (not “bads”): more of a good increases satisfaction. If the consumer is to remain indifferent, the loss of one good must be compensated by a gain of the other. Hence, IC slopes downward.
2. Higher Indifference Curves Represent Higher Levels of Satisfaction
A family of indifference curves is called an indifference map. In such a map, any indifference curve lying to the right and above another represents a higher level of satisfaction, because it contains combinations with larger quantities of at least one good.
If IC₂ lies above IC₁, every point on IC₂ involves more of at least one commodity than the corresponding point on IC₁. Since both goods are desirable, IC₂ is preferred to IC₁.
3. Indifference Curves Never Intersect Each Other
Two indifference curves cannot intersect. If they did, it would contradict the assumption of a consistent preference ordering.
Suppose IC₁ and IC₂ intersect at point A. Let B be another point on IC₁ and C another point on IC₂. Since A and B lie on IC₁, the consumer is indifferent between A and B. Since A and C lie on IC₂, he is also indifferent between A and C. By transitivity, he must be indifferent between B and C. But inspection of the diagram would show that B contains more of both goods than C (or vice versa), so the consumer must strictly prefer B to C. This is a contradiction.
4. Indifference Curves are Convex to the Origin
A typical indifference curve is convex to the origin, i.e. it bends towards the origin. This shape reflects the law of diminishing Marginal Rate of Substitution (MRS).
The Marginal Rate of Substitution of X for Y (MRSxy) is the amount of Y which the consumer is willing to sacrifice in order to obtain one extra unit of X, while remaining on the same indifference curve (same level of satisfaction). As the consumer has more and more of X and less and less of Y, he is prepared to give up fewer and fewer units of Y for each additional unit of X. Thus, MRSxy diminishes as we move down along the IC.
Moving from A to B: X increases by 1, Y falls from 9 to 7 ⇒ MRS = 2 Y for 1 X.
Moving from B to C: X increases by 1, Y falls from 7 to 5 ⇒ MRS = 2/1 (still high).
Moving from C to D: X increases by 1, Y falls from 5 to 3 ⇒ MRS remains 2.
In a more realistic schedule, MRS would gradually fall (e.g. 4, 3, 2, 1). This declining MRS is represented by the convex shape of the indifference curve.
Hence, convexity of an indifference curve to the origin is simply a graphical representation of the principle of diminishing marginal rate of substitution.
5. Indifference Curves are Thin (They Have No Thickness)
An indifference curve is drawn as a thin line, not as a thick band. If an indifference curve had thickness, then two points on the same “band” could represent different levels of satisfaction, which would contradict the definition of an indifference curve (all points must yield exactly the same utility).
Therefore, in theory, an indifference curve is a precise locus and has no thickness.
6. There is a Family (Map) of Indifference Curves
For a given consumer and given set of goods, there is not just one indifference curve. There is a whole indifference map consisting of an infinite number of curves, each representing a different level of satisfaction (U₁, U₂, U₃, …). Curves lying further from the origin represent successively higher levels of satisfaction.
This property is important because it allows us to analyse changes in the consumer’s welfare: movement to a higher indifference curve means increase in satisfaction; movement to a lower curve implies loss of welfare.
7. Indifference Curves are Normally Convex, not Concave
While the usual assumption is convexity, in special cases indifference curves can be:
- Perfect substitutes: Straight-line indifference curves with constant MRS.
- Perfect complements: L-shaped (right-angle) indifference curves.
However, for normal goods analysed in undergraduate microeconomics, the standard assumption is that indifference curves are strictly convex, consistent with a diminishing MRS and a diversified consumption pattern.
Summary Table: Properties of Indifference Curves
| Property | Essence |
|---|---|
| Downward sloping | To maintain same satisfaction, more of X requires less of Y (and vice versa). |
| Higher IC = higher satisfaction | Curves toward the north-east represent larger bundles and therefore higher utility. |
| No intersection | ICs cannot intersect; intersection would violate consistency and transitivity of preferences. |
| Convex to the origin | Reflects diminishing marginal rate of substitution of one good for another. |
| No thickness | Every point on a given IC represents exactly the same level of satisfaction. |
| Indifference map | An infinite number of ICs exist, each for a different satisfaction level. |
Importance of Indifference Curves (Brief Note)
Although the question mainly asks for definition and properties, it is useful (and marks-fetching) to briefly mention the importance of indifference curves:
- They form the basis of the modern theory of consumer equilibrium (with the budget line).
- They help distinguish and analyse income effect, substitution effect and price effect.
- They provide a more realistic framework based on ordinal utility and do not require cardinal measurement of utility.
- They allow us to analyse the effect of changes in prices and income on the welfare of the consumer.
Conclusion
To sum up, an indifference curve is a fundamental tool in modern microeconomics. It represents all those combinations of two goods which provide the consumer with the same level of satisfaction. Its main properties—downward slope, convexity to the origin, non-intersection and the interpretation of higher curves—follow directly from rational, consistent and smoothly diminishing preferences. Indifference curve analysis, as developed in your prescribed text by T.R. Jain & V.K. Ohri, replaces the unrealistic cardinal utility approach and provides a more solid basis for the theory of demand, consumer equilibrium and welfare.