DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : H. Srividya
Designation : SL / CCP
Institute : GPW, Palamaner, Chitoor dist
Branch : Commercial and Comp. practice
Semester : V Semester
Subject : Business Economics
Sub-Code : CCP-502
Topic : Consumer Surplus
Duration : 50 minutes
Sub Topic : Indifferent curves Analysis
Teaching Aids : PPT, animation

CCP502.30 1
Objectives
On completion of this period, you would be
able to
 Explain the properties of Indifference Curves
with appropriate graphs

CCP502.30 2
 Recap
In the previous class, we have discussed:
 Consumer’s Equilibrium through Indifference Curve
Analysis and
 On what assumptions the concept was developed

CCP502.30 3
Properties

Indifference Curves show

 The various combinations that give equal
satisfaction to the consumer
 Indifference Curves have certain properties

CCP502.30 4
Properties of Indifference
Curve
1.Slope downwards from left to right
 In an Indifference Schedule
 When the quantity of one commodity is increased,
the quantity of the other commodity is reduced
 Then only the same level of satisfaction remains

CCP502.30 5
 Contd..
Y
IC
 If the quantity of the two
commodities increased in
the next combination,

Commodity-y
 it shows higher level of
satisfaction
 Which is contrary

O X
Commodity-x
Fig:1

CCP502.30 6
 Contd..

2. It can not go upward

 If it goes upward, it means that in the next
combination, the quantities of both commodity x
and y increase
 Then it shows higher level of satisfaction
 Which is contrary to the theory

CCP502.30 7
 Contd..

3. It is not parallel to OX-Axis

 If it is so, it means that the quantity of commodity x
increases without any change in the quantity of
commodity y

 It is contrary to the indifference curve theory

CCP502.30 8
 Contd..

4. It is not parallel to OY-Axis

 If it is so, it means that the quantity of commodity
y increases without any change in the quantity of
commodity x
 It is contrary to the indifference curve theory

CCP502.30 9
 Properties
Hence, Indifference curves should not be like this

Upward
Parallel to x axis
IC

y IC y

O O
x x
Fig:2
CCP502.30 10
 Contd..
Properties Y
5. It is convex to the IC
origin
 According to IC

Commodity-y
Analysis-
 Marginal Rate of
substitution diminishes
 Hence IC is convex to
the origin O X
Commodity-x

Fig:3
CCP502.30 11
 Contd..
Properties Y
IC
6. Indifference curve can
not be concave to the
origin

Commodity-y
 If it is in concave shape,
it means that MRS is
increasing, which is
contrary O X
Commodity-x
Fig:4
CCP502.30 12
 Contd..
Properties
7. Indifference curve to the
right indicates higher level of
satisfaction P Q
 At OM units of N

Commodity y
commodity x, IC1 is the
IC2
indifference curve
 The units of x increases
IC1
to OK, IC2 is the higher
indifference curve O M K
Fig:5 Commodity x
CCP502.30 13
 Contd..

8.Indifference curves cannot

intersect each other Y

IC2 – Higher Indifference

S T
Curve

IC1 – Lower Indifference

Commodity y
K
Curve
IC2
If they intersect at K, it
means K = S & K=T
IC1
Which is absurd O X
Commodity x
CCP502.30
Fig:6 14
 Contd..
Y

N IC1
Commodity y

IC2

O X
Commodity x M

Fig:7
CCP502.30 15
 Contd..

9. Indifference Curves can not touch either axis

IC1 touches Y-axis

It means that consumer will have
Commodity y-ON units
Commodity x – zero units
IC2 touches X-axis means
Commodity x – OM units and
Commodity y – Zero units
Which is contrary
CCP502.30 16
Summary

In this period, we have discussed:

Properties of indifference Curves:
 Slopes downwards
 Cannot touch either axis
 Convex to the origin
 Cannot intersect each other

CCP502.30 17
Quiz:
1. Every Indifference Curve to the right
indicates ______.

a) Higher Indifference Curve

b) Lower Indifference Curve
c) Equal Indifference Curve

CCP502.30 18
 Contd..

2. An Indifference Curve is ________

a) Convex to the Origin

b) Concave to the Origin
c) Parallel to X-Axis

CCP502.30 19
 Contd..

3. Indifference Curve is Convex to the Origin

because Marginal Rate of
Substitution_______________

a) Increases
b) Diminishes
c) Does not change

CCP502.30 20
Frequently Asked Questions

1. List the properties of Indifference Curves.

2. Explain the properties of Indifference Curves.

CCP502.30 21