What is the Indifference Curve?

The indifference curve is a graphic representation, which includes the consumption of two goods with which the consumer is indifferent, which means, that you have no opportunity to acquire greater satisfaction by selecting one option over another of those that are represented in the curve.

These curves seek to simplify a microeconomic model where only two goods are found, consumer behavior in the face of this Difficulty of choice, it occurs under normal conditions and in this way you will consume more of one good over another, since everything will depend on your needs. In this case the indifference curve will be decreasing.

What is the indifference curve for?

It is very important to know the habits, expectations and needs of the consumer so that business success can be achieved. Today consumers have changed their behavior, this is because they get more information regarding brands and the market through various channels and from others customers.

This type of curve is a tool used to analyze the samples of the different combinations between two goods that provide the same amount of utility to a consumer and be preferred over others combinations.

They also help to understand the meaning of the curve plotted on indifference maps, which It is very important for the planning of actions, marketing strategies and for the decision making of the Business.

Application of the indifference curve

This type of curves in conjunction with the budget disposition that the consumer has to spend, are the characteristics that are needed to specify what is the equilibrium point of the consumer.

For the result to be achieved in the consumer equilibrium to be adequate, the consumer's preferences must be regular, which means that the indifference curves will have to assume the constraints required by this type of model.

Indifference curve map

The combinations of goods allow appropriate levels of utility, therefore, each point of the plane must pass a curve of difference, these being a balance within the altitude curves of a map, which will be represented by the lines that the same altitude offers. This means that within a plane there are innumerable indifference curves.

The graphical representation that shows this type of curve for the consumer in conjunction with the different levels utility, is known as the indifference map, which shows in an orderly way the preferences of the consumer.

The points that demonstrate the various levels of utility are associated with the different curves, which are determined as the preferences of individuals that may differ from person to person other.

Norms for the analysis and interpretation of the indifference curve

Among the standards that analyze and interpret this type of curve are:

• It includes a negative slope, this is because while advancing on the curve from left to right they decrease. When the consumption of one good decreases, compensation for the increase in consumption of another good may occur.
• At no time can the curves cross, since they would be two different types of satisfaction that interrupt the beginning of the utility level. In this sense, only one indifference curve must pass through each point in space.
• From the beginning they are curved, because consumers tend to value scarce goods more highly and stand out more for the combinations of goods than for the extreme consumption situations.
• The highest curve that can be drawn is the one that differs with the economic constraint of the consumer in the form of a tangent.
• In case the consumer considers the two goods as an excellent substitute, the curves will have the shape of parallel lines, but if, on the contrary, they consider the goods in a complementary way, the curves will have the form of the.
• The goods that are further from the origin, the higher the utility level of the curve of indifference, in the same way, the goods that are within the highest curve, are consumer goods favorite.
• The slope of this type of curve is called the marginal ratio of substitution, it also determines whether the consumer wishes to substitute one good for another, without modifying his utility level.

It can be determined that consumer preferences are highly useful terms originated by economists graphically on geometric maps by means of the curves of indifference.

That is why its study is very important, since the goods belong to a particular shape of this type of curve, therefore, may be different for each type of person, where the consequences of the diversity of prices in each of the cases.