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An indifference curve

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Explain an indifference curve in everyday language. Graphically show and briefly explain how someone would determine their optimal consumption.

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Solution Summary

An indifference curve is defined.

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We start by taking an imaginary household and giving it a bundle of goods, say 18 units of clothing and 10 units of food (refer to the table).

Now, offer the household an alternative bundle, say 13 units of clothing and 15 units of food. This alternative combination of goods has 5 fewer units of clothing and 5 more units of food than the first one.

Whether the household prefers this bundle depends on the ...

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