Indifference Curve

Loading the player...

What is the 'Indifference Curve'

The indifference curve is the diagram depicting equal levels of utility (satisfaction) for a consumer faced with various combinations of goods.

 

Indifference Curve

BREAKING DOWN 'Indifference Curve'

As an example, consider the diagram above. This consumer would be most satisfied with any combination of products along curve U3. This consumer would be indifferent between combination Qa1, Qb1, and Qa2, Qb2.

RELATED TERMS
  1. Marginal Rate of Substitution

    The amount of a good that a consumer is willing to give up for ...
  2. Ishikawa Diagram

    A diagram that shows the causes of an event and is often used ...
  3. Total Utility

    The aggregate level of satisfaction or fulfillment that a consumer ...
  4. Marginal Utility

    The additional satisfaction a consumer gains from consuming one ...
  5. Tree Diagram

    A diagram used in strategic decision making, valuation or probability ...
  6. Flat Yield Curve

    A yield curve in which there is little difference between short-term ...
Related Articles
  1. Term

    What is an Indifference Curve?

    An indifference curve determines the combinations of two goods that will provide equal satisfaction.
  2. Options & Futures

    Options Pricing: Profit And Loss Diagrams

    A profit and loss diagram, or risk graph, is a visual representation of the possible profit and loss of an option strategy at a given point in time. Option traders use profit and loss diagrams ...
  3. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  4. Professionals

    Yield Curve

    Yield Curve
  5. Professionals

    Yield Curve Risk

    CFA Level 1 - Yield Curve Risk. Learn how yield curve risk can affect your bond portfolio and how the various shifts in the yield curve relate to interest-rate risk.
  6. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  7. Professionals

    Yield Curves

    FINRA/NASAA Series 65: Section 8 Yield Curves. In this section normal, inverted and flat yield curves and yield spreads.
  8. Professionals

    Yield Curves

    CFA Level 1 - Yield Curves. Learn how governments can influence short and long-term interest rates. Discusses the various shapes of yield curves and how they are formed.
  9. Bonds & Fixed Income

    Yield Curve

    Learn more about how this curve is used to predict changes in economic output and growth.
  10. Investing

    Trade Bond ETFs Using Yield Curves

    Different types of yield curves provide important insights for trading bond-based securities.
RELATED FAQS
  1. How does marginal utility relate to indifference curves in microeconomics?

    Discover how the economic concepts of marginal utility, ordinal preferences and indifference curves generate a unique way ... Read Answer >>
  2. How can you find the demand function from the utility function?

    Learn about how the utility function can be used to derive the demand function, and how both of these concepts relate to ... Read Answer >>
  3. A diagram of yields on debt instruments shows that short-term interest rates are ...

    The correct answer is a. An inverted—or negative—yield curve is an unusual situation that generally indicates an unhealthy ... Read Answer >>
  4. What are the different ways that utility is measured in economics?

    Learn about the two methods used to measure the concept of utility and how utility influences other economic models of consumer ... Read Answer >>
  5. Why are the term structure of interest rates indicative of future interest rates?

    Learn why economists believe the term structure for interest rates reflects investor expectations for future interest rates ... Read Answer >>
  6. How can the yield curve help me make investment decisions?

    Learn about the yield curve, and discover why this chart is an important economic indicator. How do Treasury bond yields ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center