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An example of how indifference curves are obtained as the level curves of a utility function. A graph of indifference curves for several utility levels of an individual consumer is called an indifference map. Points yielding different utility levels are each associated with distinct indifference curves and these indifference curves on the ...
While an indifference curve mapping helps to solve the utility-maximizing problem of consumers, the isoquant mapping deals with the cost-minimization and profit and output maximisation problem of producers. Indifference curves further differ to isoquants, in that they cannot offer a precise measurement of utility, only how it is relevant to a ...
The indifference curves are L-shaped and their corners are determined by the weights. E.g., for the function min ( x 1 / 2 , x 2 / 3 ) {\displaystyle \min(x_{1}/2,x_{2}/3)} , the corners of the indifferent curves are at ( 2 t , 3 t ) {\displaystyle (2t,3t)} where t ∈ [ 0 , ∞ ) {\displaystyle t\in [0,\infty )} .
The consumer will maximise their utility at the kink point in the highest indifference curve that intersects the budget line where x = y. [3] This is intuition, as the consumer is rational there is no point the consumer consuming more of one good and not the other good as their utility is taken at the minimum of the two ( they have no gain in ...
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.
Under the standard assumption of neoclassical economics that goods and services are continuously divisible, the marginal rates of substitution will be the same regardless of the direction of exchange, and will correspond to the slope of an indifference curve (more precisely, to the slope multiplied by −1) passing through the consumption bundle in question, at that point: mathematically, it ...
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.
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.