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A collection of (selected) indifference curves, illustrated graphically, is referred to as an indifference map. The slope of an indifference curve is called the MRS (marginal rate of substitution), and it indicates how much of good y must be sacrificed to keep the utility constant if good x is increased by one unit.
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.
The set of all these efficient points that could be traded to is the contract curve. In the graph below, the initial endowments of the two people are at point X, on Kelvin's indifference curve K 1 and Jane's indifference curve J 1. From there they could agree to a mutually beneficial trade to anywhere in the lens formed by these indifference ...
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 ...
This ensures that the slopes of the indifference curves and the production set are the same. As a result, Crusoe ends up consuming at the same point he would have if he made all the above decisions together. In other words, using the market system has the same outcome as choosing the individual utility maximisation and cost minimisation plans. [1]
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 ...
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.
Indifference curve for perfect complements. A perfect complement is a good that must be consumed with another good. The indifference curve of a perfect complement exhibits a right angle, as illustrated by the figure. [6] Such preferences can be represented by a Leontief utility function. Few goods behave as perfect complements. [6]