INDIFFERENCE CURVE ANALYSIS 
                                  
        Definition: 
         An indifference curve is a graph showing combination of two goods that give the consumer 
        equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is 
        indifferent  between  the  two  and  all  points  give  him  the  same  utility.  In  other  words,  the 
        consumer would be indifferent to these different combinations. 
        Example of choice of goods which give consumers the same utility 
                                         
        Table plotted as indifference curve 
         
                                                  
                                                                                                                                                       Description: Graphically, the indifference curve is drawn as a downward sloping convex to the 
                                                                                                                                                       origin. The graph shows a combination of two goods that the consumer consumes. 
                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
                                                                                                                                                       The above diagram shows the U indifference curve showing bundles of goods A and B.  
                                                                                                                                                        
                                                                                                                                                       To the consumer, bundle A and B are the same as both of them give him the equal satisfaction. 
                                                                                                                                                        
                                                                                                                                                       In other words, point A gives as much utility as point B to the individual. The consumer will be 
                                                                                                                                                       satisfied at any point along the curve assuming that other things are constant. 
                                                                                                                                                        
                                                                                                                                                       Indifference curve map 
                                                                                                                                                       We can also show different 
                                                                                                                                                       indifference curves. 
                                                                                                                                                       All choices on I2 give the same 
                                                                                                                                                       utility. But, it will be a higher net 
                                                                                                                                                       utility than indifference curve I1. 
                                                                                                                                                       I4 gives the highest net utility. 
                                                                                                                                                       Basically, I4 would require higher 
                                                                                                                                                       income than I1. 
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                    Budget line 
                    A budget line shows the 
                    combination of goods that can be 
                    afforded with your current income. 
                     
                    If an apple costs £1 and a banana 
                    £2, the above budget line shows all 
                    the combinations of the goods 
                    which can be bought with £40. For 
                    example: 
                             20 apples @ Rs.1 and 10 
                              bananas @Rs.2 
                             10 apples @Rs.1 and 15 
                              bananas @Rs.2 
                              
                     
                    Optimal Choice of Goods for Consumer  
                    (Consumer Equilibrium - Two Commodities- Ordinal Utility Analysis) 
                             Given a budget line of B1, the consumer 
                              will  maximise  utility  where  the  highest 
                              indifference  curve  is  tangential  to  the 
                              budget line (20 apples, 10 bananas) 
                             Given       current      income        –     IC2     is 
                              unobtainable.  
                             IC3  is  obtainable  but  gives  less  utility 
                              than the higher IC1 
                     
                     
                     
                     
                                                                                                                                                     
                                                                                                                                                     
                                                                                                                                                     
                                                                                                                                                     
                                                                                        Notes Compiled for Classroom Discussion by 
                                                                                                                                                     
                                                                                                   Dr.R.Albert Christopher Dhas (2020) 
                                                                                                         The American College, Madurai