Features of Indifference Curve

What are the characteristics of Indifference Curve?

Introduction

In previous sessions, we discussed in detail about the Indifference Curve. We first discussed the normal case of indifference curve with a bundle of goods having combination of two goods, where in a consumer is indifferent between different combination of the same till the total utility from that bundle remains constant. Suppose if the bundle consists of Apples and Bananas having a certain utility then, increase in one and simultaneously decrease in another, resulting in keeping the utility level same to the consumer, all these bundle would fall in a curve shaped line on a graphical presentation, which we call the indifference curve as the consumer is indifferent. But in this case, the simultaneous increase in one good and decrease in another is not equal because the Marginal Rate of Substitution is diminishing with each such cycle. Now in the second case, the increase and simultaneously decrease happens in constant proportion i.e., both goods are perfect substitute of each other (for example, a 10-rupee note and 10-rupee coin) which results in the Marginal Rate of Substitution to remain constant and hence the indifference curve is a straight line on a graphical presentation.

We also discussed the Indifference Map which is family of set of indifference curves which represent bundles of goods having equal utility. The concept of Monotonic Preferences rationale gives birth to multiple indifference curves showing multiple bundles of goods. The monotonic preferences say that, between two bundles of goods, (a1, b1) and (a2, b2), if a1>a2 and b1 is no less than b2; then consumer is bound to prefer the 1^st bundle i.e., (a1, b1) as it offers greater utility. So it means if between two bundles having combination of two goods, one bundle gives more of one good and has second good no less than other, then the bundle with more of a single good will be preferred by the consumer.

In this session, we will discuss the features of Indifference curve.

Characteristics of Indifference Curve

(1) Indifference Curve is downward sloping from left to right

The indifference curve slopes downward from left to right. This simply means that in a bundle of two goods (say for example Apples and Bananas), an increase in one good needs to get set off with decrease in the other good. That is to say, in order to have more bananas, consumer will have to forego some apples in order to maintain the utility level of the bundle constant and vice versa. Because if it doesn’t happen and if quantity of bananas increase, without any decrease in apples, then this leads to increase in the total utility of the bundle which then falls in the higher indifference curve, i.e., above the previous one. So to say, till the consumer is on the same indifference curve, increase in quantity of one is bound to get set off with the decrease in the other. Here in the example, increase in bananas – decrease in apples or vice versa.

Let us take an example;

Bundles	Bananas	Apple
A	1	15
B	2	12
C	3	10
D	4	9

The graphical representation shows exactly what we discussed as above.

(2) Higher Indifference curve denotes greater utility level to the consumer

We discussed in the previous session about the monotonic preferences, which refers to the phenomenon which says, that consumer always prefers bundles having more quantity of a particular good as compared to other bundles with remaining goods being equal or less than the preferred bundle. So to say, as long as the marginal utility of a particular good, service or commodity is positive i.e., greater than zero, the consumer will always prefer to have more of that as every additional unit of that will result in greater level of utility or satisfaction.

Let us understand the same with an example.

Bundles	Bananas	Apple
A	1	10
B	2	10
C	3	10

Here in the above example, we have kept the quantity of apples constant at 10 in all the three combinations A, B, & C consisting of Apples and Bananas. Now we can see as we increase the quantity of Banana by 1, the combination B will provide greater satisfaction than A because an additional banana will provide higher level of utility. And as quantity of apples remaining constant the combination B with additional banana will fall on a higher indifference curve denoting greater level of utility or satisfaction to the consumer. Similarly, the combination C has 3 bananas, i.e., one additional than B, thus providing higher level of satisfaction or greater level of utility and thus C lies on the higher indifference curve. Thus the higher indifference curves denoting greater level of utility or satisfaction sourced from greater quantity of either apples or bananas or both.

(3) Two Indifference Curves cannot intersect each other.

If we take a look at any indifference map, we see that two indifference curves never intersect each other. Intersection of two indifference curves leads to falsify the phenomenon monotonic preferences and provides conflicting result.

For better understanding let’s take a hypothetical situation that two indifference curves do intersect each other. 

Combination	Bananas	Apples
A	7	10
B	9	7
C	9	5

Here in the above graphical representation, we see that point A and B showing the A and B combination lie on same indifference curve -1 which means that both A and B gives the same level of utility or satisfaction. At the same time, point B and B showing the B and C combination lie on same indifference curve -2 which means that both B and C gives the same level of utility or satisfaction. This rationale leads to conclusion that even combination B and C are equal. But that is false. Because combination B has 2 apples more than C, keeping the bananas equal at 9 quantities, which clearly means and shows that combination B should provide higher level of utility than A, proving the above hypothesis wrong. Thus it proves that intersecting indifference curves provide false results and hence concluding that two indifference curves can never intersect each other.

Conclusion

In this session we discussed in details about the features or characteristics of indifference curves. Summarizing, it is important to remember that Indifference curves are downward sloping, higher indifference curves shows greater level of utility or satisfaction and lastly that two indifference curves never intersect each other.