Q:

What are characteristics of an indifference curve?

A:

An indifference curve has a negative slope and is convex to the origin. Two indifference curves cannot cross each other. A higher indifference curve indicates a higher satisfaction level. Indifference curves are drawn in a graph to show the combination of two products that give a consumer a given level of satisfaction. Economists use them to analyze the effect of changes in prices and income.

The negative slope for any two products suggests that an increase in consumption of one product must accompany a decrease in the other to maintain the same level of satisfaction on an indifference curve. The convex nature of the curve to the origin implies that a real-world consumer cannot buy and use only one type of a good. If two goods were perfect substitutes for each other, indifference curves would be concave or straight lines.

Indifference curves do not intersect, because different combinations of products give varying levels of satisfaction, especially when the amount of the same product is different in each curve. Consumers prefer products on the higher curve that gives a higher level of satisfaction.

In analyzing indifference curves, one can tell whether two products complement or substitute each other. If a fall in the price of product A results in increased purchase of A and B, the two products are complements.


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