Question

Explain any two properties (characteristics) of the indifference curve with the help of a diagram.

Answer 1

1. An Indifference Curve Slopes Downward from Left to the Right: An indifference curve slopes downward from left to right, i.e., it has a negative slope. This property is based on the assumption that if a consumer consumes more of one commodity (food), he must consume less quantity of the other (clothing), then only he will have the same level of satisfaction from different combinations of the two commodities. This follows from the assumption of non-satiety. For example, diagram illustrates that when the consumers move from combination 'A' to combination 'B' on the given indifference curve (IC), he consumes 1 more unit of food, but 3 units less of clothing so as to get the same level of satisfaction from both the combinations. This necessitates that an indifference curve must be negatively sloped. However, if the amount of food is increased and the amount of clothing remains the same, the consumer will prefer new combination to the initial one because the new combination will give him more utility. Therefore, these two combinations will not lie on the same indifference curve.
   
2. Higher Indifference Curves Yield Higher Satisfaction: An indifference curve which lies above and to the right of another indifference curve gives a higher level of satisfaction than the lower one. Higher indifference curve represents those combinations which yield more satisfaction than the combinations on the lower indifference curve. A combination on a higher indifference curve will give more satisfaction than a combination on a lower indifference curve since the former combination will have more amount of one commodity or the other or more amount of both the commodities. Consider the indifference curves IC₁ and IC₂ in diagram. Combination 'B' lies on the higher indifference curve IC₂ than combination 'A' which lies on the lower indifference curve IC₁. Combination 'B' gives more satisfaction to the consumer than combination 'A' because he gets more quantity of both goods-MM₁ more of X good and NN₁ more of Y good at combination 'B' compared to combination 'A'. It is therefore, evident that the higher indifference curve gives higher satisfaction.