What is indifference curve example?
An indifference curve is a line showing all the combinations of two goods which give a consumer equal utility. In other words, the consumer would be indifferent to these different combinations. Example of choice of goods which give consumers the same utility.
What is the formula for marginal rate of substitution?
Marginal Rate of Substitution Formula The Marginal Rate of Substitution of Good X for Good Y (MRSxy) = ∆Y/ ∆X (which is just the slope of the indifference curve).
Why can’t indifference curves cross?
Along the curve the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve. Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.
What is the meaning of indifference curve?
Definition: An indifference curve 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.
What is the slope of indifference curve?
The slope of the indifference curve is called the marginal rate of substitution , which declines as the quantity of X increases relative to the quantity of Y. Of course, the amounts of commodities X and Y that the individual will be able to consume depends on the level of that person’s income.
Can an indifference curve be a straight line?
Yes, the indifference curve can be a straight line if both the goods are perfect substitutes that is both goods provide the same level of satisfaction
Is Mrs positive or negative?
The MRS changes along a non-linear indifference curve. For the downward-sloping convex indifference curves which result from well- behaved preferences, the MRS is always negative, and always decreases (becomes greater in absolute value) as the amount of good x decreases.
What is the features of indifference curve?
An indifference curve is a graphical representation of a combined products that gives similar kind of satisfaction to a consumer thereby making them indifferent. Every point on the indifference curve shows that an individual or a consumer is indifferent between the two products as it gives him the same kind of utility.
What are the uses of indifference curve?
The indifferent curve analysis is used in measuring the cost of living or standard of living in terms of index numbers. We come to know with the help of index numbers whether the consumer is better off or worse off by comparing two time periods when the income of the consumer and prices of two goods change.
What is an example of indifference?
The definition of indifference is a lack of care, concern or interest. An example of indifference is when you don’t care or put effort into something. Unemotional apathy.
What is the formula of Mr?
Marginal Revenue is the revenue. It is the revenue that a company can generate for each additional unit sold; there is a marginal cost. The marginal cost formula = (change in costs) / (change in quantity).
What does MRTS mean?
marginal rate of technical substitution