Indifference Curve, Indifference Map &
Properties of Indifference Curve
1 Mark Questions
1. Define an indifference curve. (All India 2014, Delhi 2010)
Ans. Indifference curve is a curve showing different combinations of two goods, each
combination offering the same level of satisfaction to the consumer. So that the
consumer is indifferent, between all set of bundles.
2.What is meant by monotonic preferences. (All India 2014)
or
What are monotonic preferences? (Delhi 2010)
Ans. Monotonic preferences means that greater consumption of a commodity by the
consumer gives him higher level of satisfaction, as compared to less.
3.Define an indifference map. (Delhi 2010; All India 2010)
Ans. Indifference map refers to a set of indifference curves corresponding to different
income levels of the consumer.
3 Marks Questions
4. Explain the meaning of Diminishing Marginal Rate of Substitution with the help
of a numerical example. (All India 2013)
Ans. Marginal Rate of Substitution refers to the rate at which the consumer is willing to
sacrifice one good to obtain one more unit of the other good.
5. Define Marginal Rate of Substitution. Why is an indifference curve
convex? (Delhi 2012)
or
Define an indifference curve. Why is it convex to the origin? (All India 2011)
Ans. Marginal Rate of Substitution Marginal Rate of Substitution refers to the rate at
which the consumer is willing to sacrifice one good to obtain one more unit of the other
good.
Indifference curve is a curve showing different combinations of two goods, each
combination offering the same level of satisfaction to the consumer. So that the
consumer is indifferent, between all set of bundles.
Indifference curves is convex to the point of origin because of diminishing Marginal Rate
of Substitution. We can say that for every additional unit of a good, a consumer is willing
to give up less and less amount of another good as the utility that he derives from its
consumption goes on diminishing.
4 Marks Questions
6. Define an indifference curve, Explain why an indifference curve is downward
sloping from left to right. (Delhi 2012)
Ans. Indifference curve is a curve showing different combinations of two goods, each
combination offering the same level of satisfaction to the consumer. So that the
consumer is indifferent, between all set of bundles.
An indifference curve always slopes downward from left to the right, i.e. it has a
negative slope. It is because of the simple reason that if the consumer wants to have
more units of one good, he will have to reduce the number of units of another good, his
level of satisfaction remaining unchanged, in other words, an indifference curve slope
downwards because of limited income of the consumer
Note After the study of above answer. We observe two things. First, the indifference
curve is sloping downward from left to right. Second, the indifference curve is strictly
convex towards the origin.
7. Define an indifference map. Explain why an indifference curve to the right
shows higher utility level. (Delhi; All India 2012)
Ans. Indifference map refers to a set of indifference curves corresponding to different
income levels of the consumer.
Higher indifference curve gives higher level of satisfaction than the lower indifference
curve, as we move to the right, the level of satisfaction also rises. Hence, IC 2 represents
higher level of satisfaction than the IQ. Because IC2 curve lies to the right side of the IQ
curve. This is because of monotonic preferences because higher indifference curve
means that the consumer is getting more of both the commodities, and atleast
more units of one good and no less of other
6 Marks Questions
8. Explain the concept of ’Marginal Rate of Substitution’ with the help of a
numerical example. Also, explain its behavior along an indifference curve. (All
India 2014)
Ans. Marginal Rate of Substitution refers to the rate at which the consumer is willing to
substitute one good to obtain one more unit of the other good. Symbolically,
Example Equilibrium is struck at point Q. At the point of equilibrium, price line and
indifference curve are tangent to each other implying that the slope of price line
If a
consumer wants to have more of X, it reduces the MU of X. Therefore, he will be willing
to sacrifice less unit of Y. As he goes on obtaining more and more of X, MU of X starts
declining so he will sacrifice less and less of good Y.
9. Explain why is an indifference curve (a) downward sloping, and (b) convex
(All India 2014, Foreign 2014)
or
Explain three properties of indifference curves. (All India 2013, 2011: Delhi 2011)
or
State and explain the characteristics of indifference curves. (Delhi 2010)
Ans. Properties/characterstics of indifference curves are:
(i) Indifference curves are negatively sloped or they slope downward It shows that more
of one commodity implies less of the other, so that total satisfaction (at any point on
Indifference curve) remains the same.
(ii) Indifference curves are convex to the point of origin An indifference curve will
ordinarily be convex to the point of origin. This is because of diminishing Marginal Rate
of Substitution. We can say that for every additional unit of a good, a consumer is willing
to give up lesser and lesser amount of another good.
(iii) Indifference curve touches neither X-axis nor Y-axis It is often assumed that a
consumer buys a combination of two goods. Hence, an indifference curve touches
neither X-axis nor Y-axis as touching either axis represents zero units of the respective
goods.
(iv) Indifference curves never touch or intersect each other Each Indifference curve
represents a different level of satisfaction. So, their intersection is ruled out. Also if
indifference curves intersects Law of Transitivity and indifference law will contradict
each other.
Note (i) According to Law of Transitivity if a consumer prefer bundle A over bundle B,
and bundle B over bundle C, then he will indirectly prefer bundle A over bundle C.
(ii) According to indifference law if a consumer is indifferent between bundle A and B,
and bundle B and C, then he will be indifferent over bundle A and C too.
10.What are monotonic preferences? Explain why is an indifference curve (Delhi
2011)
(i) Downward sloping from left to right
(ii) Convex to the origin.
Ans. Monotonic preferences means that greater consumption of a commodity by the
consumer gives him higher level of satisfaction.
(i) Downward sloping from left to right.
Indifference curve is a curve showing different combinations of two goods, each
combination offering the same level of satisfaction to the consumer. So that the
consumer is indifferent, between all set of bundles.
An indifference curve always slopes downward from left to the right, i.e. it has a
negative slope. It is because of the simple reason that if the consumer wants to have
more units of one good, he will have to reduce the number of units of another good, his
level of satisfaction remaining unchanged, in other words, an indifference curve slope
downwards because of limited income of the consumer
Note After the study of above answer. We observe two things. First, the indifference
curve is sloping downward from left to right. Second, the indifference curve is strictly
convex towards the origin.
(ii) Convex to the origin
Marginal Rate of Substitution Marginal Rate of Substitution refers to the rate at which
the consumer is willing to sacrifice one good to obtain one more unit of the other good.
Indifference curve is a curve showing different combinations of two goods, each
combination offering the same level of satisfaction to the consumer. So that the
consumer is indifferent, between all set of bundles.
Indifference curves is convex to the point of origin because of diminishing Marginal Rate
of Substitution. We can say that for every additional unit of a good, a consumer is willing
to give up less and less amount of another good as the utility that he derives from its
consumption goes on diminishing.
11. Explain the concept of Marginal Rate of Substitution (MRS) by giving an
example. What happens to MRS when consumer moves downward along the
indifference curve? Give reasons for your answer.(Delhi2011)
Ans. Marginal Rate of Substitution refers to the rate at which the consumer is willing to
substitute one good to obtain one more unit of the other good. Symbolically,
Example Equilibrium is struck at point Q. At the point of equilibrium, price line and
indifference curve are tangent to each other implying that the slope of price line
If a consumer wants to have more of X, it reduces the MU of X. Therefore, he will be
willing to sacrifice less unit of Y. As he goes on obtaining more and more of X, MU of X
starts declining so he will sacrifice less and less of good Y.
Suppose initially, the consumer is at point Q where he units of good X and yj units of
good. Now, the consumer comes down to point R i.e. the consumer wants to have more
of x from xj to x2 (where x2 > X|) it reduces the MU of x. Therefore, he will be willing to
sacrifice less unit of y. As he goes on obtaining more and more of x, MU of x starts
declining, so he will sacrifice lesser and units of good y say fromyi toy 2 and so on.
Suppose initially, the consumer is at point Q where he get x1 units of good X and units
of good. Now, the consumer comes down to point R i.e. the consumer wants to have
more of x from x-j to x2 (where x2 > X|) it reduces the MU ofx. Therefore, he will be willing
to sacrifice less unit of y. As he goes on obtaining more and more of x, MU of x starts
declining, so he will sacrifice lesser and units of good y say from y-| to y2 and so on.
