ARBUS 100 Lecture Notes - Lecture 5: Indifference Curve

• School: University of Waterloo
• Department: Arts and Business
• Course: ARBUS 100
• Professor: Bob Sproule

Document Summary

Properties of indifference curves: movement along an indifference curve. Level of satisfaction remains the same: movement among indifference curves. Combination a&b provide the consumer with the same level of satisfaction because they are both located on the same indifference curve. Combination c&d provide the same consumer with the same level of satisfaction because they are located on the indifference curve i2. Suggests that a and c provide the same level of satisfaction; this is not possible since a and c are located on two different indifference curves. Related to a property called marginal rate of substitution . Measures the number of units of y that must be sacrificed per unit of x gained, so as to maintain a constant level of satisfaction (in order to remain on the same indifference curve) Given by the slope of an indifference curve (reflects movement along, never among, indifference curves)