Notes on ncert economics class 12 are easy to understand and to gain the conceptual knowledge in a different but simple manner. Applied microeconomics consumption, production and markets this is a microeconomic theory book designed for upperdivision undergraduate students in economics and agricultural economics. Indifference curves constructing an indifference curve. Developed by the irishborn british economist francis y. An alternative approach to understanding consumer choice, section 7.
A popular alternative to the marginal utility analysis of demand is the indifference curve analysis. An indifference curve defines the substitution between goods x and y that is acceptable in the mind of the consumer. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. Indifference curve approach free notes for economics class 12. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility. First, the diminishing mrs assumption is relaxed to allow the existence of concave4 indifference curves. Consumers equilibrium notes microeconomics cbse class. Pdf ml jhingan microeconomics pdf download for free. Apr 17, 2020 chapter indifference curve chapter notes, micro economics, class 12 edurev notes is made by best teachers of commerce. Indifference curve analysis is not an easy analysis. This implies that the indifference curves should designate a reference point at the current. An alternative approach to understanding consumer choice learning objectives.
Cbse issues sample papers every year for students for class 12 board exams. Theory of demand supply, price elasticity, indifference curves, welfare analysis 1. The difficulty with a rejection of transitivity which underlies indifference curve analysis is a reductio ad absurdum, based upon the money pump. This may well explain the oft found stickiness in adjustment to changes in wages, prices. An alternative approach to understanding consumer choice learning objectives 1. Consumer equilibrium marginal utility and indifference curve analysis. Part two analyses the theory of consumer behaviour both in terms of the utility analysis and the indifference curve approach, along with the concept of elasticity of demand.
It cannot be used to study the group behaviour of consumers and their equilibrium showing the different levels of satisfaction with different combinations of two goods. We can just use the absolute value of the slope to simplify the analysis. An indifference curve represents a series of combinations between two different economic goods, between which an individual. Examples of indifference curves third example indifference curves between bourbon and. As we see that point a is at higher indifference curve ic2 which shown he get higher satisfaction. Examples of indifference curves left and right shoes \ right shoes left shoes 1 5 7 2 4 3 8 6 i1 i2 i3 examples of indifference curves third example indifference curves between bourbon and temperance lectures for w. Each curve corresponds to a fixed output amount and shows at which combination of the two inputs this output amount remains the same or indifferent, hence the name of the chart type. Since indifference curves are downward sloping, they have a negative slope. Indifference curve analysis is based on individual behaviour and equilibrium. Description indifference curves depict sensitivity of an output to two inputs. Part one discusses the tools and methods of economic analysis, the nature and central problems of an economy, and the price system. Understanding consumers equilibrium by indifference curve.
Edgeworth, it is widely used as an analytical tool in the study of consumer. Indiference curve analysis,ppt microeconomics economic. Since more is better, an indifference curve cannot have a positive slope. Most generally and assuming youre referring to a utility map, it helps us understand the combinations of goods that lead to various levels of utility and most importantly helps us understand which combination maximizes utility subject to a bud. Indifference curves and marginal rate of substitution video khan. Notes for cbse class 11th chapter 2 consumers equilibrium. In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. Because we know the definition of mrs, keeping the negative sign is unnecessary. Consumers tastes can be related to utility concepts or indifference curves. An indifference curve is a convex shaped curve depicting the graphical representation of the different combinations deriving the same level of satisfaction to the consumer by considering two commodities. Explain the notion of the marginal rate of substitution and how it relates to.
Indifference curve adopted the concept of ordinal utility instead of cardinal utility. Theory of demand supply, price elasticity, indifference. Similarly all the combinations lying on indifference curve ii provide the same satisfaction but the level of satisfaction on indifference curve ii will be greater than the level of satisfaction on indifference curve i likewise, all higher indifference curves, iii, iv and v represent progressively higher and higher levels satisfaction. It implies that the consumer is capable of simply comparing different levels of satisfaction. Download as ppt, pdf, txt or read online from scribd. Two indifference curve never cut each other our hypothesis is that consumer is at same level of satisfaction that is ic, now suppose two indifference curve intersect each other. Indifference analysis economics business economics. What is the importance of the indifference curve analysis.
An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. The economics profession, as articulated through the. Download cbse class 12 economics indifference curve analysis in pdf, questions answers for economics, cbse class 12 economics indifference curve analysis. Lecture notes economics indifference curve analysis studocu. The indifference curve is a graph showing the different combinations of two goods that report the same satisfaction to a person, and are preferred to other combinations. Thus the basis of indifference curve approach is the preference indifference hypothesis. The indifference curve analysis measures utility ordinally. If two indifference curves intersect each other, then at the point of intersection, the consumer is. This section presents an alternative approach to describing personal preferences, called indifference curve analysis, which avoids the need for using numbers to measure utility. The concept of indifference curve analysis was first propounded by british economist francis ysidro edgeworth and was put into use by italian economist vilfredo pareto during the early 20 th century. According to the indifference curve approach, it is not possible for the consumer to. This document is highly rated by commerce students and has been viewed 33202 times. Indifference curves and marginal rate of substitution.
The economics profession, as articulated through the megaphone of intermediate micro economics. Consumer equilibrium marginal utility and indifference. When a consumer consumes various goods and services, then there are some combinations, which give him exactly the same total satisfaction. In general, there is an indifference curve through any point in xy space. Examples of indifference curves kent state university.
Consumer equilibrium refers to a situation, in which a consumer derives maximum satisfaction, with no intention to change it and subject to given prices and his given income. Explain utility maximization using the concepts of indifference curves and budget lines. On an indifference map, higher indifference curve represents a higher level of satisfaction than any lower indifference. Law of diminishing marginal utility dmu, assumptions of law of dmu, relationship between totally utility and marginal utility. This article presents the proper analysis of indifference curve systems once some of the simplifying assumptions used to teach beginning students are relaxed. In this chapter, we begin the formal study of microeconomics by examining the eco. We begin the study of the economic behavior of the consumer by examining tastes.
However, it was brought into extensive use by economists j. It explains consumer behaviour in terms of his preferences or rankings for different combinations of two goods, say x and y. According to it when a consumer is presented with a number of various combinations of goods, he can order or rank them in. The point of maximum satisfaction is achieved by studying indifference map and budget line together. Lecture notes economics indifference curve analysis. Pdf the thesis of this paper is that when the indifference curve is concave to the origin, the. Before we proceed to determine the consumers equilibrium through this approach, let us understand some useful concepts related to indifference curve analysis. In microeconomics, indifference curve is an important tool of analysis in the study of consumer behavior. This approach assigns an order to consumer preferences rather than measure them in terms of money. Understanding consumers equilibrium by indifference curve analysis. Conditions of consumers equilibrium using marginal utility analysis and indifference curve analysis of consumers equilibrium. The importance of indifference curve analysis in economics are as follows.
So far in the text, we have described the level of utility that a person receives in numerical terms. The concept of indifference curve analysis was first. We start analysing indifference curves as a way of representing utility, then we explain what the marginal rate of substitution is and, lastly, what different kinds of indifference curves there. Browse more topics under theory of consumer behavior. This is based on consumer preference and believes that we cannot quantitatively measure human satisfaction in monetary terms. When one arrives at two options that are indifferent to the individual, these two points that represent them are on the same indifference curve.
Utility functions and indifference curves questions 1 for the part of the function shown in the graph, are preferences complete. The approach of the indifference curve is based on ordinal utility in. Below is a topic of economics consumer equilibrium marginal utility and indifference curve analysis for class 12 based on the pattern of cbse class 12 economics. Sensitivity analysis excel model with indifference curves. So far in the text, we have described the level of utility that a person receives in. Cbse class 12 economics indifference curve analysis. Indiference curve analysis,ppt free download as powerpoint presentation. Economists use the vocabulary of maximizing utility to describe consumer choice. Likewise, if he were to give up any less, he would be on a higher indifference curve. Similarly all the combinations lying on indifference curve ii provide the same satisfaction but the level of satisfaction on indifference curve ii will be greater than the level of satisfaction on indifference curve i likewise, all higher indifference curves, iii, iv and v represent progressively higher and. Indifference curves can never intersect each other indifference curves can never intersect each other because each indifference curve represents a specific level of satisfaction.
The indifference curve shows the different combinations of two goods that give equal satisfaction and utility to the consumers. Indifference curve analysis microeconomics lumen learning. Indifference curve, in economics, graph showing various combinations of two things usually consumer goods that yield equal satisfaction or utility to an individual. Why two indifference curves cannot intersect each other. Indifference curve definition what is meant by the term indifference curve. Students should solve the cbse issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this. Economics online classes at takshila learning is an easy, convenient and simple way to understand the concepts of economics class 12. Indifference curves have a negative slope, and in special cases zero slope. This reveals a potential source of confusion for students. Aggregate demand and supply in macro economic problems. Indifference curves demand analysis microeconomics. Introduction to indifference curves and budget lines economics.
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