The main attributes
or properties or characteristics of indifference curves are as follows:
(1)
Indifference Curves are Negatively Sloped:
The indifference curves
must slope down from left to right. This means that an indifference curve is
negatively sloped. It slopes downward because as the consumer increases the consumption
of X commodity, he has to give up certain units of Y commodity in order to
maintain the same level of satisfaction.
In fig. 3.4 the two
combinations of commodity cooking oil and commodity wheat is shown by the
points a and b on the same indifference curve. The consumer is indifferent
towards points a and b as they represent equal level of satisfaction.
At point (a) on the
indifference curve, the consumer is satisfied with OE units of ghee and OD
units of wheat. He is equally satisfied with OF units of ghee and OK units of
wheat shown by point b on the indifference curve. It is only on the negatively
sloped curve that different points representing different combinations of goods
X and Y give the same level of satisfaction to make the consumer indifferent.
(2)
Higher Indifference Curve Represents Higher Level:
A higher indifference
curve that lies above and to the right of another indifference curve represents
a higher level of satisfaction and combination on a lower indifference curve
yields a lower satisfaction.
In other words, we can
say that the combination of goods which lies on a higher indifference curve
will be preferred by a consumer to the combination which lies on a lower
indifference curve.
In this diagram (3.5)
there are three indifference curves, IC1, IC2 and IC3
which represents different levels of satisfaction. The indifference curve IC3
shows greater amount of satisfaction and it contains more of both goods than IC2
and IC1 (IC3 > IC2 > IC1).
(3)
Indifference Curve are Convex to the Origin:
This is an important
property of indifference curves. They are convex to the origin (bowed inward).
This is equivalent to saying that as the consumer substitutes commodity X for
commodity Y, the marginal rate of substitution diminishes of X for Y along an
indifference curve.
In this figure (3.6) as
the consumer moves from A to B to C to D, the willingness to substitute good X
for good Y diminishes. This means that as the amount of good X is increased by
equal amounts, that of good Y diminishes by smaller amounts. The marginal rate
of substitution of X for Y is the quantity of Y good that the consumer is
willing to give up to gain a marginal unit of good X. The slope of IC is
negative. It is convex to the origin.
(4)
Indifference Curve Cannot Intersect Each Other:
Given the definition of
indifference curve and the assumptions behind it, the indifference curves
cannot intersect each other. It is because at the point of tangency, the higher
curve will give as much as of the two commodities as is given by the lower
indifference curve. This is absurd and impossible.
In fig 3.7, two
indifference curves are showing cutting each other at point B. The combinations
represented by points B and F given equal satisfaction to the consumer because
both lie on the same indifference curve IC2. Similarly the
combinations shows by points B and E on indifference curve IC1 give
equal satisfaction top the consumer.
If combination F is
equal to combination B in terms of satisfaction and combination E is equal to
combination B in satisfaction. It follows that the combination F will be
equivalent to E in terms of satisfaction. This conclusion looks quite funny
because combination F on IC2 contains more of good Y (wheat) than
combination which gives more satisfaction to the consumer. We, therefore,
conclude that indifference curves cannot cut each other.
(5)
Indifference Curves do not Touch the Horizontal or Vertical Axis:
One of the basic
assumptions of indifference curves is that the consumer purchases combinations
of different commodities. He is not supposed to purchase only one commodity. In
that case indifference curve will touch one axis. This violates the basic
assumption of indifference curves.
In fig. 3.8, it is
shown that the in difference IC touches Y axis at point C and X axis at point
E. At point C, the consumer purchase only OC commodity of rice and no commodity
of wheat, similarly at point E, he buys OE quantity of wheat and no amount of
rice. Such indifference curves are against our basic assumption. Our basic
assumption is that the consumer buys two goods in combination.