Each indifference curve suggests combinations among which the consumer is indifferent. Curves that are higher and to the right are preferred to We assume that each consumer seeks the highest indifference curve possible. The budget line gives the combinations of two goods that the consumer A2-Economics CIE -Budget Lines and Indifference Curves. Assessment. Indiffrence Curves and Giffen Goods. According to Indifference Curve approach, consumers equilibrium is determined if the following two conditions are satisfied MRSxy is the rate at which the consumer is willing to sacrifice Y to obtain one more unit of X. Thus, we can say that ''A consumer is in equilibrium at a point where budget line Meaning of consumer's equilibrium - assumptions - budget line or price line - indifference map You can analyze consumer's equilibrium through the technique of indifference curve and budget line. Consumer's tastes, preferences and spending habits remain unchanged throughout the analysis. Indifference curve analysis is based on the following few assumptions ?. The consumer takes rational decisions to maximize his satisfaction. Consumer equilibrium is quite superior to utility analysis as consumer equilibrium takes into consideration more than one product at a time and it According to indifference curve analysis, consumer's equilibrium is at a point where the slope of , indifference Filed Under: CBSE Tagged With: Budget Line and Consumer Equilibrium through Indifference Curve Analysis or Ordinal Approach, Class 12 Economics, Economics Budget Set. with indifference curves This is the "price-consumption curve". or "offer curve" : locus of all trades the consumer optimally chooses when facing different Now put the two consumers' offer curves together in the exchange Edgeworth box Where they intersect is equilibrium Must be on contract Consumer equilibrium is reached at the point of tangency between the budget line and the highest-attainable indifference curve. Practice exam questions. Indifference Curves - Cross Price Elasticity and Substitutes. Student videos. Indifference Curves - Income and Substitution Effects for Inferior Indifference curve analysis explains the demand analysis without assuming the marginal utility of money as constant and it is based on multi-commodity On the other hand, when the price increases it reduces the real income of consumer and he is in equilibrium at the lower level of satisfaction which Indifference Curve Analysis. Learning Objectives. Describe the purpose, use, and shape of indifference curves. Explain how one indifference curve differs from another. Explain how to find the consumer equilibrium using indifference curves and a budget constraint. The concept of indifference curve analysis was first propounded by British economist Francis Ysidro Edgeworth and was put into use by Italian economist Since any combination of the two goods on an indifference curve gives equal level of satisfaction, the consumer is indifferent to any combination The concept of indifference curve analysis was first propounded by British economist Francis Ysidro Edgeworth and was put into use by Italian economist Since any combination of the two goods on an indifference curve gives equal level of satisfaction, the consumer is indifferent to any combination Consumer's Equilibrium Indifference curve analysis fully explained