Siteadmin, Bureaucrats, Check users, nsAm_Govt_101RO, nsAm_Govt_101RW, nsAm_Govt_101_ta, nsJudgesRO, nsJudgesRW, nsJudges_talkRO, nsJudges_talkRW, nsTeam2RO, nsTeam2RW, nsTeam2_talkRO, nsTeam2_talkRW, oversight, Administrators
125,789
edits
Changes
Jump to navigation
Jump to search
mLine 125:
Line 125: +
Economics Lecture Four (view source)
Revision as of 19:29, September 21, 2009
, 19:29, September 21, 2009→Indifference Curve: format
The graph below is for a typical set of three indifference curves (I<sub>1</sub>, I<sub>2</sub> and I<sub>3</sub>) for someone for two goods X and Y. Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis). As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X. The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I<sub>1</sub> to I<sub>2</sub>.
The graph below is for a typical set of three indifference curves (I<sub>1</sub>, I<sub>2</sub> and I<sub>3</sub>) for someone for two goods X and Y. Note that this graph does not compare Price and Quantity, but compares the Quantity of good X (on the x-axis) with the Quantity of good Y (on the y-axis). As one goes down a specific curve, the person is "indifferent" with giving up Quantity of good Y in exchange for more of good X. The person becomes more satisfied or happier when he shifts to an entirely new curve, as in moving from I<sub>1</sub> to I<sub>2</sub>.
[[File:IndifferenceCurve3.gif|500px]]
[[File:IndifferenceCurve3.gif|500px]]
{{clear}}
The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar). In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.
The next graph below is for two goods X and Y that '''''are perfect substitutes for each other''''' (like our example above of a chocolate bar and a peanut butter candy bar). In the case of perfect substitutes, the person is happy to substitute one good for the other on a one-for-one basis, and hence the slope of the curves is a perfect negative one.
[[File:IndifferenceCurve1.gif|550px]]
[[File:IndifferenceCurve1.gif|550px]]