Question

(2) List the properties of indifference curves and explain the intuition behind each property (that is, why must the indifference curve obey this property)?

Answer 1

The indifference curve represents various combinations of two goods that provide the same level of utility to the consumer.

The properties of indifference curve:

1. Two indifference curves can never intersect each other:

Each indifference curve represents different level of satisfaction. The utility obtained from a consumption bundle cannot be equal to the utility obtained from the consumption bundle lying on other indifference curve.

2. The higher indifference curve represents more level of satisfaction:

The higher the indifference curve, the greater will be the level of satisfaction. The consumer will prefer a consumption bundle on the higher indifference curve to obtain more utility.

3. The indifference curve is downward sloping:

The indifference curve is downward sloping because of diminishing marginal rate of substitution which states that in order to obtain additional unit of a good, more of other goods are needed to be sacrificed.

4. The indifference curve is convex to the origin:

The indifference curve is convex to the origin because the utility obtained from each additional unit consumed falls with consumption.