1. Lectures in Microeconomics-Charles W. Upton Indifference Curves

2. Utility Functions Individuals have utility functions U(A,B)

3. Indifference Curves Utility Functions If U(A 1,B 1 ) > U(A 2,B 2 ) (A 1,B 1 ) is preferred to (A 2,B 2 ) If U(A 1,B 1 ) = U(A 2,B 2 ) The consumer is indifferent between (A 1,B 1 ) & (A 2,B 2 )

4. Indifference Curves Utility Functions (A 1,B 1 ) is preferred to (A 2,B 2 ) –Then U(A 1,B 1 ) > U(A 2,B 2 )

5. Indifference Curves Utility Functions (A 1,B 1 ) is preferred to (A 2,B 2 ) –Then U(A 1,B 1 ) > U(A 2,B 2 ) The consumer is indifferent between (A 1,B 1 ) & (A 2,B 2 ) –Then U(A 1,B 1 ) = U(A 2,B 2 )

6. Indifference Curves Combinations of A & B A B We represent an individual’s preferences with indifference curves, plots of points representing equal utility

7. Indifference Curves Combinations of A & B A B

8. Indifference Curves Combinations of A & B \ A B 1 5 7 2 4 3 8 6

9. Indifference Curves Combinations of A & B \ A B 1 5 7 2 4 3 8 6 3>1

10. Indifference Curves An Indifference Curve \ A B 1 5 7 2 4 3 8 6 5=2=6

11. Indifference Curves An Indifference Curve \ A B 1 5 7 2 4 3 8 6 5=2=6 I1I1

12. Indifference Curves An Indifference Curve \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2

13. Indifference Curves An Indifference Curve \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2

14. Indifference Curves An Indifference Curve \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2 I3I3

15. Indifference Curves Properties of Indifference Curves \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2 I3I3

16. Indifference Curves There are an Infinite Number \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2 I3I3

17. Indifference Curves They Never Cross \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2 I3I3 R >G

18. Indifference Curves They Never Cross \ A B 1 5 7 2 4 3 8 6 I1I1 I2I2 I3I3 G>R

19. Indifference Curves End ©2004 Charles W. Upton