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The theory of indifference curves was developed by Francis Ysidro Edgeworth, who explained in his 1881 book the mathematics needed for their drawing; [3] later on, Vilfredo Pareto was the first author to actually draw these curves, in his 1906 book.
A community indifference curve is an illustration of different combinations of commodity quantities that would bring a whole community the same level of utility. The model can be used to describe any community, such as a town or an entire nation.
Whether indifference curves are primitive or derivable from utility functions; and; Whether indifference curves are convex. Assumptions are also made of a more technical nature, e.g. non-reversibility, saturation, etc. The pursuit of rigour is not always conducive to intelligibility. In this article indifference curves will be treated as primitive.
He developed utility theory, introducing the indifference curve and the famous Edgeworth box, which is now familiar to undergraduate students of microeconomics. He is also known for the Edgeworth conjecture , which states that the core of an economy shrinks to the set of competitive equilibria as the number of agents in the economy gets larger.
Indifference curves C 1, C 2 and C 3 are shown. Each of the different points on a particular indifference curve shows a different combination of risk and return, which provide the same satisfaction to the investors. Each curve to the left represents higher utility or satisfaction. The goal of the investor would be to maximize their satisfaction ...
Indifference curves (as shown at left) are used to show bundles of goods to which a person would assign equal utility. An isoquant (in the image at right) is a curve of equal production quantity for alternative combinations of input usages , and an isocost curve (also in the image at right) shows alternative usages having equal production costs.
An example indifference curve is shown below: Each indifference curve is a set of points, each representing a combination of quantities of two goods or services, all of which combinations the consumer is equally satisfied with. The further a curve is from the origin, the greater is the level of utility.
A utilitarian social indifference curve is linear and downward sloping to the right. The Max-Min social indifference curve takes the shape of two straight lines joined so as they form a 90-degree angle. A social indifference curve drawn from an intermediate social welfare function is a curve that slopes downward to the right.