An Indifference Curve:
Different combinations of two
commodities (as found in Indifference
Schedule) can be presented in a diagram.Then consumer gets different points and when such points are connected,a curve is obtained. The said curve is called as “Indifference Curve”. Therefore,an indifference curve is the locus of
all combinations of commodities from which the consumer derives the same level of satisfaction. It is also called “Iso-Utility Curve” or” Equal Satisfaction Curve”. Indifference Curve is illustrated in diagram 2.15. X axis represents Apple and Y axis represents orange. Point ‘R’ represents combination of 1 apple and 20 oranges, at ‘S’ 2 apples and 15 oranges and at ’T’ 3 apples and 12 oranges. Similarly UKV points are obtained. These five points give the same level of satisfaction.The consumer will be neither better off nor worse off in choosing any one of these points. When one joins all these five
points (RS, T) U and V one can get the Indifference Curve ‘IC’.
An Indifference Map:
One can draw several indifference
curves each representing an Indifference schedule. Hence, an Indifference Map is a
family or collection or set of indifference
curves corresponding to different levels of satisfaction. The Indifference Map is
illustrated in Diagram 2.16.
In the diagram 2.16, the indifference
Curves IC1, IC2 and IC3 represent the
Indifference Map, Upper IC representing
higher level of satisfaction compared to
Marginal Rate of Substitution:
The shape of an indifference curve provides useful information about preferences.Indifference curve replaces the concept of marginal utility with the concept of the marginal rate of substitution.
According to Leftwich “The marginal rate of substitution of x for y (MRSxy) is defined as the maximum amount of y the consumer is willing to give up for getting an additional unit of x and still remaining on the same indifference curve”.