Thursday, May 15, 2008

Indifference Curves

In microeconomic theory, an indifference curve is a graph showing different bundles of goods, each measured as to quantity, between which a consumer is indifferent. That is, at each point on the curve, the consumer has no preference for one bundle over another. In other words, they are all equally preferred. One can equivalently refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. Utility is then a device to represent preferences rather than something from which preferences come (Geanakoplis, 1987, p. 117). The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles (Böhm and Haller, 1987, p. 785).