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    Indifference Curves

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    rizwan_ashrf
    This document contains a table showing an individual's indifference curve between dinners and DVDs. It shows that as the number of dinners increases from 2 to 9, the number of DVDs must decrease to maintain the same total satisfaction level of 100. The rate at which DVDs must be substituted for each additional dinner (the marginal rate of substitution) decreases with each addition. The document explains that an indifference curve assumes a decreasing marginal rate of substitution.

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    Indifference Curves

    Uploaded by

    rizwan_ashrf
    26 views1 page
    This document contains a table showing an individual's indifference curve between dinners and DVDs. It shows that as the number of dinners increases from 2 to 9, the number of DVDs must decrease to maintain the same total satisfaction level of 100. The rate at which DVDs must be substituted for each additional dinner (the marginal rate of substitution) decreases with each addition. The document explains that an indifference curve assumes a decreasing marginal rate of substitution.

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    This document contains a table showing an individual's indifference curve between dinners and DVDs. It shows that as the number of dinners increases from 2 to 9, the number of DVDs must decrease to maintain the same total satisfaction level of 100. The rate at which DVDs must be substituted for each additional dinner (the marginal rate of substitution) decreases with each addition. The document explains that an indifference curve assumes a decreasing marginal rate of substitution.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    26 views1 page

    Indifference Curves

    Uploaded by

    rizwan_ashrf
    This document contains a table showing an individual's indifference curve between dinners and DVDs. It shows that as the number of dinners increases from 2 to 9, the number of DVDs must decrease to maintain the same total satisfaction level of 100. The rate at which DVDs must be substituted for each additional dinner (the marginal rate of substitution) decreases with each addition. The document explains that an indifference curve assumes a decreasing marginal rate of substitution.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    You are on page 1of 1

    M.

    Salahuddin Microeconomics
    Indifference Curve

    No. of Change No. of Change Total Increase in Decrease


    Dinners in DVDs in Satisfaction satisfaction in
    Dinners DVDs by having satisfaction
    additional by losing
    Dinner DVDs (in
    column 4)
    2 ------ 100 ------ 100
    3 1 75 -25 100 +20 -20
    4 1 55 -20 100 +17 -17
    5 1 40 -15 100 +13 -13
    6 1 30 -10 100 +9 -9
    7 1 25 -5 100 +6 -6
    8 1 23 -2 100 +4 -4
    9 1 22 -1 100 +1 -1

    DVDs 120
    100
    80
    60 Series1
    40
    20
    0
    0 2 4 6 8

    Dinners

    If we do not bring about a compensating decrease in DVDs when we have one


    more dinner we shall not manage to stay on the same indifference curve. Therefore
    we keep on substituting DVDs for dinners. However, the rate at which we
    substitute dinners for DVDs keeps on falling. This rate is called marginal rate of
    substitution. A normal indifference curve is plotted with an underlying assumption
    of decreasing Marginal Rate of Substitution (MRS). Column 4 in the above table
    is giving that MRS, where you can see that every time we have one more Dinner,
    the DVDs that we have to sacrifice (to keep the total satisfaction constant) keeps
    on decreasing.

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