Question

In class, we usually draw “razor thin” indifference curves. The continuity axiom rules out “thick” indifference curves.

Answer 1

The indifference curve is a graph that represents a combination of two goods which will provide the consumer with equal levels of utility and here the consumer has no preference of one combination over the other combination. Thus, it represents a locus of various points showing different combinations of two goods that provides equal utility to the consumer. Thus, the demand patterns of the individual customer can be analysed from the combination bundles of the graph. The indifference curves are forward sloping, convex and cannot intersect. Always higher indifference curves are preferred to lower ones.

                                    Indifference curves are mostly thin. A thick indifference curve violates the non-stationary assumption and that would prevent us from having a single and unique equilibrium. Each axis on an indifference curve represents one type of an economic good and along the curve, the consumer has no preference for either combination of goods as they both have the same level of utility to a customer. The curve goes higher up as the consumer income increases as they can afford more of same type of goods. The marginal rate of substitution and the opportunity costs are represented by this curve. The slope of this indifference curve gives the Marginal Rate of Substitution [MRS] which represents the rate with which the consumer is ready to give up one of its goods for the other.

Consider two points on the graph. This shows that the indifference curves cannot be thick as the two points cannot lie on a same line and hence it remains thin.