EXCEPTIONAL SHAPES OF INDIFFERENCE CURVE

·         EXCEPTIONAL SHAPES OF INDIFFERENCE CURVE
FOR NET ECONOMICS/COMMERCE/MANAGEMENT/

·         CA/CS FOUNDATION BUSINESS ECONOMICS

·         MICRO ECONOMICS

·         INTRODUCTION TO INDIFFERENCE CURVE

1.     AN INDIFFERENCE CURVE IS A CURVE WHICH REPRESENTS DIFFERENT COMBINATION OF TWO GOODS WHICH YIELD EQUAL SATISFACTION TO THE CONSUMER AND HE IS INDIFFERENT IN THE MATTER OF CHOICE AMONG THEM.

2.     THE SHAPE OF THE INDIFFERENCE CURVE IS CONVEX TO THE POINT OF ORIGIN. IT IS BASED ON TH PRINCIPLE OF DIMINISHING RATE OF MARGINAL SUBSTITUTION

·         EXCEPTIONAL SHAPE OF INDIFFERENCE CURVE

1.     IN CASE OF PERFECT SUBSTITUTE

2.     IN CASE OF PERFECTLY COMPLEMENTARY GOODS

·         PERFECT SUBSTITUTE

1.     WHEN TWO GOODS ARE PERFECT SUBSTITUTE OF EACH OTHER THEIR INDIFFERENCE CURVE MAY BE A STRAIGHT DIAGONAL LINE SLOPING DOWNWARD FROM LEFT TO RIGHT AT AN ANGLE AT 45 DEGREE WITH EITHER AXIS

2.     REASON BEING THE MARGINAL RATE OF SUBSTITUTION WILL BE CONSTANT AND MRS OF X FOR Y IS ONE

3.     SUPPOSE TAJ MEHAL AND TATA TEA ARE PERFECT SUBSTITUTE. IF IN PLACE OF TATA TEA 1 KG THE CONSUMER BUY 1 KG OF TAJ MEHAL HIS TOTAL SATISFACTION REMAINS UNCHANGED.

·         STRAIGHT LINE INDIFFERENCE CURVE

·         D

·         PERFECTLY COMPLEMENTARY GOODS

1.     WHEN TWO GOODS ARE PERFECT COMPLEMENTARY TO EACH OTHER. JUST AS LEFT AND RIGHT SHOE . THE INDIFFERENCE CURVE WILL BE PARALLEL TO EACH OTHER AND BENT AT 90 DEGREE ANGLE OR L SHAPED

2.     COMPLEMENTARY GOODS ARE THOSE WHICH ARE USED IN FIXED RATIO

3.     MRS WILL BE ZERO

·         RIGHT ANGLED INDIFFERENCE CURVE

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