indifference curve


Also found in: Wikipedia.

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.
Indifference curveclick for a larger image
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 ?
With exclusive contracting, incentive compatibility for the H-type restricts the location of the L-type's allocation to lie on or below the H-type indifference curve through [C.
An indifference curve is a geometrical (or algebraic) device showing all bundles of goods that give a certain consumer the same utility, however one cares to measure it.
The indifference curve deduces the subjective planning preferences of architects in terms of seismic resistance and cost effectiveness.
Panel A of figure 1 illustrates this trade-off with a familiar indifference curve budget-set diagram.
The model employs the Shannon-Hartley theorem as an indifference curve for the possible trade-offs between permissible signal strength and allotted channel widths.
The slope dy/dm of an indifference curve through (15 - s, 15 + 3s) is given by
Indifference Curve is a regular on heavy ground and is out to banish the bad memory of his disappointing performance in the Coral Welsh National at Chepstow last time out.
With just five horses in training at her stable in County Cork, O'Sullivan finds herself taking on some of Britain's biggest names at Chepstow but does not feel Indifference Curve will be out of place.
With just five horses in training in County Cork, O'Sullivan finds herself taking on some of Britain's biggest names at Chepstow but does not feel Indifference Curve will be out of place.
Function of fundamental modern (Markowitz) portfolio and its further amplifications (Fabozzi, Markowitz 2002; Reilly, Brown 2003) is an intention to commensurate investment profitability and risk objectively and to give an opportunity to select a portfolio taking into consideration investor's indifference curve.
Combination of this sort implies that the indifference curve would be linear and parallel (MasColell, 1995, 178).