It is a set of those combinations of two goods which offer the consumer the same level of satisfaction. So, the consumer is indifferent across any number of combinations in his indifference set.
An indifference curve is a graph showing a 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.
An indifference curve, with respect to two commodities, is a graph showing those combinations of the two commodities that leave the consumer equally well off or equally satisfied—hence indifferent—in having any combination on the curve. Each point on the indifference curve indicates one combination of two goods.
Indifference curve is the locus of all such points which show different combinations of two commodities yielding the same level of satisfaction to the consumer.
Concept of Indifference curve
Let’s consider a situation when a consumer is spending his income across two fruits that are Apple and Orange where both these fruits can be used as substitutes of each other.
This table shows different combinations of apples and oranges.
Following are the observations relating to above table:
- Combinations A, B, C and D are specified by the consumer according to their taste and preferences.
- Each combination offers the same level of satisfaction to the consumer. So, that Combination A = Combination B= Combination C= Combination D.
- As there is no difference among combinations A,B, C and D, it can be said that the consumer is indifferent across these combinations. Accordingly, these combinations together form an ‘Indifference Set’ of the consumer.
Diagrammatic presentation of the above table gives the following curve
- Each point on the curve shows the combination of two goods, offering the same level of satisfaction to the consumer.
- Thus, the level of satisfaction of the consumer at point R is the same as S, T, U and V.
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