indifference curve


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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 ?
The shape of the indifference curve implies weak sustainability.
Using the definitions of r and [Gamma], a membership indifference curve (MIC) can be defined, which depicts combinations of wage and membership levels such that expected utility of a union member and of a non-union worker are the same
The bank maximizes utility where its efficiency frontier is tangent to an indifference curve.
Any point northeast of the indifference curve represents superior net value.
Assuming the indifference curve between currency and deposits are homothetic, and that the ratio of these opportunity costs is the appropriate measure (by analogy with price theory) determining the currency deposit ratio, this ratio is independent of the money rate of interest.
Other demonstrations in Fox's series show an animated skier skiing down a consumer indifference curve and a small hamburger riding to the top of a total utility curve.
There, a social indifference curve from some arbitrary social evaluation function passes through the initial income distribution given by [Y.
5) Note that utility rises as one moves in a southeasterly direction in the indifference curve map.
From Equation (1), the slope of type HN individuals' indifference curve under contract (I, c) is
Here, (19) the consumer is indifferent between market baskets A and B; we know this since both lie on indifference curve [U.
While loving the ground, Indifference Curve, third in the Cork National, has only place prospects at best off 130.
2] represents a move from one indifference curve to another (with an interpretation of cardinal utility attached to it), Hicks and Allen propose the concept of net substitutability, which does not require a shift from one indifference curve to the other.