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Question
State the meaning of indifference curves.
Short Note
Solution
- The Consumer is rational and his aim is to derive maximum satisfaction.
- The utility cannot be cardinally measured but can be ranked or compared or ordered by an ordinal number such as I, II, III, and so on.
- The indifference curve approach is based on the concept “Diminishing Marginal Rate of Substitution”.
- The consumer is consistent. This assumption is called the assumption of transitivity.
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Ordinal Analysis (or) Ordinal Utility Approach (or) Hicks and Allen Approach (or) Indifference Curve Analysis
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