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Indifference Curves definitions

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  • Indifference Curve
    A graphical representation showing all combinations of two goods that yield identical satisfaction for a consumer.
  • Utility
    A measure of satisfaction or happiness derived from consuming goods, often quantified in abstract units called utils.
  • Util
    An abstract unit used to quantify the satisfaction or happiness a consumer receives from consumption.
  • Consumption Bundle
    A specific combination of quantities of different goods chosen by a consumer.
  • Marginal Utility
    The extra satisfaction gained from consuming one additional unit of a good, typically decreasing with each unit.
  • Law of Diminishing Returns
    A principle stating that as more of a good is consumed, the added satisfaction from each extra unit declines.
  • Marginal Rate of Substitution
    The rate at which a consumer is willing to exchange one good for another while maintaining the same satisfaction level.
  • Slope
    A measure indicating how much of one good must be given up to gain more of another, represented by the steepness of the curve.
  • Indifference Curve Map
    A collection of multiple indifference curves, each representing different satisfaction levels for a consumer.
  • Downward Sloping
    A property where increasing one good requires decreasing the other to keep satisfaction unchanged, resulting in a negative slope.
  • Bowing Inward
    A shape characteristic where the curve bends toward the origin, reflecting a changing willingness to substitute goods.
  • Non-Intersection
    A property ensuring that no two curves representing different satisfaction levels ever cross each other.
  • Higher Indifference Curve
    A curve representing greater satisfaction and higher consumption compared to those closer to the origin.
  • Budget Constraint
    A boundary showing all combinations of goods a consumer can afford, independent of their satisfaction.