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Consumer Preference

The document discusses consumer preference and indifference curves. It defines ordinal utility and indifference curves, provides an indifference schedule example, and outlines some key properties of indifference curves including being downward sloping, representing higher utility when higher, never intersecting, and being convex to the origin.

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Madhu
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34 views9 pages

Consumer Preference

The document discusses consumer preference and indifference curves. It defines ordinal utility and indifference curves, provides an indifference schedule example, and outlines some key properties of indifference curves including being downward sloping, representing higher utility when higher, never intersecting, and being convex to the origin.

Uploaded by

Madhu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CONSUMER

PREFERENCE
ORDINAL UTILITY
Ordinal utility holds that utility cannot be measured but can be
ordered according to consumers preferences.
• Different product combination may be viewed as having same utility.
• And these combinations of same utility consist of one Indifference
Curve.
INDIFFERENCE CURVE
• An indifference curve is the locus of points which show the different
combinations of two commodities a consumer is indifferent about.
• It is a graph showing combination of two goods that give the
consumer equal satisfaction and utility.
• Each point on an indifference curve indicates that a consumer is
indifferent between the two and all points give him the same utility.
INDIFFERENCE CURVE
INDIFFERENCE SCHEDULE
COMBINATION SANDWICH(M) COLD COFFEE(N) TU
A 1 6 U
B 3 3 U
C 4 2 U
D 7 1 U

Indifference Curve
7
6
5
4
3
2
1
0
1 3 4 7
PROPERTIES OF INDIFFERENCE CURVES
a) Downward Sloping:
Downward sloping demand curve means a rational consumer will demand more of a
commodity when its price falls.
b) Higher indifference curve represent higher utility:
An indifference curve placed higher will represent higher
level of utility.
c) Indifferent curves can never Intersect:
Indifferent curve cannot intersect. This follows from the
assumptions of transitivity and higher utility at a higher indifference
curve.
d) Convex to the Origin:
Indifferent curves are convex to the origin. This is because
two goods cannot be perfect substitute of each other.

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