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Indifference Curves definitions

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  • Indifference Curve
    Graphical representation of combinations of goods yielding equal satisfaction for a consumer, regardless of cost.
  • Utility
    Measure of satisfaction or happiness derived from consuming goods, often quantified in abstract units.
  • Marginal Utility
    Increase in satisfaction from consuming one additional unit of a good, typically decreases as consumption rises.
  • Law of Diminishing Returns
    Principle stating that as more of a good is consumed, the extra satisfaction from each additional unit declines.
  • Consumption Bundle
    Specific combination of quantities of different goods chosen by a consumer.
  • Util
    Abstract unit used to quantify satisfaction or happiness from consumption.
  • Indifference Curve Map
    Collection of multiple indifference curves representing various satisfaction levels for a consumer.
  • Marginal Rate of Substitution
    Slope of an indifference curve at a point, indicating how much of one good a consumer will trade for another to maintain satisfaction.
  • Budget Constraint
    Limit on consumption bundles imposed by a consumer’s income and the prices of goods.
  • Downward Sloping
    Characteristic of indifference curves where increasing one good requires decreasing the other to keep satisfaction constant.
  • Bowing Inwards
    Curvature of indifference curves reflecting greater willingness to trade when one good’s quantity is low.
  • Higher Indifference Curve
    Curve representing greater satisfaction and preferred by consumers compared to lower curves.
  • Lower Indifference Curve
    Curve representing less satisfaction, less preferred by consumers compared to higher curves.
  • Absolute Value
    Positive numerical value used when calculating the slope of an indifference curve, regardless of direction.
  • Origin
    Point on a graph where the quantities of both goods are zero, used as a reference for plotting consumption bundles.