# indifference curve

(redirected from Indifference curves)

## Indifference curve

The expression in a graph of a utility function, where the horizontal axis measures risk and the vertical axis measures expected return. The curve connects all portfolios with the same utility.

## Indifference Curve

A curve on a graph where the x-axis represents a quantity of one good and the y-axis represents a quantity of a second good where the curve represents the universe of quantities with the same utility for a rational investor. The indifference curve is convex, or roughly U-shaped.
Fig. 91 Indifference curve. A combination of OA units of product X, and OB units of product Y, yields exactly as much satisfaction to the consumer as does the combination of OC units of product X and OD units of product Y.

Indifference curves always slope downwards because, rationally, consumers will always prefer more of both products and so would not be indifferent between two combinations of products where one combination offers more of both. Specifically, they would only give up one product if they receive more of another for it, being indifferent as between combination E, which offers a lot of product X and little of product Y, and combination F which offers less product X and more product Y (see ECONOMIC MAN).

## indifference curve

a curve showing alternative combinations of two products, each of which gives the same UTILITY, or satisfaction. See Fig. 91 . Indifference curves are used (along with BUDGET LINES) to determine a consumer's equilibrium purchases of two products and to analyse the effect of changes in the relative prices of these two products upon quantities demanded (see PRICE EFFECT). See CONSUMER EQUILIBRIUM, INDIFFERENCE MAP.
References in periodicals archive ?
Numerically, we find that the indifference curves are concave for all of the parameter values we examined.
However, the assumption of indifference curves being homothetic only simplifies the diagram, but is not required for the analysis.
If the level of political action and the income distribution are such that the percent change in income of the decisive voter equals the percent change in employment, and if indifference curves are homothetic, then the wage the union can extract will not change with the union's size.
His major conclusion is that the indifference curves of the hl and lh types may cross twice and different risk types may be pooled in one contract.
These officials seek points of tangency between their indifference curves (shown as I1, I2, and I3 in Figure 1(b)) and the rate-revenue curve.
3~ to center the indifference curves at i = 0 and U = |U.
1] implies that H- types have shallower indifference curves when plotted in the ([c.
For that purpose, he borrowed the concept of indifference curves from two economists of his times, Vilfredo Pareto (1848-1923) and Francis Y.
As depicted in Conrow (1995), this can be illustrated graphically using government and contractor indifference curves sketched in cost-performance space.
The family of indifference curves comes from the central bank's loss function.
The stability of preferences is further discussed in Section 4, while Section 5 briefly examines the implications of transitivity for indifference curves.
For the special case of two agents and money payoffs, the fundamental property of inequality aversion models is that the indifference curves have positive slopes in the part of the money payoff space in which the other's payoff is higher than one's own.

Site: Follow: Share:
Open / Close