Indifference Curve

AAA

DEFINITION of 'Indifference Curve'

A diagram depicting equal levels of utility (satisfaction) for a consumer faced with various combinations of goods.

 

Indifference Curve

VIDEO

Loading the player...

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. Venn Diagram

    An illustration that uses overlapping or non-overlapping circles ...
  3. Law Of Diminishing Marginal Utility

    A law of economics stating that as a person increases consumption ...
  4. Utility

    1. An economic term referring to the total satisfaction received ...
  5. Total Utility

    The aggregate level of satisfaction or fulfillment that a consumer ...
  6. Normal Profit

    An economic condition occurring when the difference between a ...
Related Articles
  1. Term

    What is an Indifference Curve?

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

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  3. Economics

    Understanding Organic Growth

    Organic growth is the increase in a company’s revenue and value due to internal operations.
  4. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  5. 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.
  6. Economics

    Understanding Cost of Revenue

    The cost of revenue is the total costs a business incurs to manufacture and deliver a product or service.
  7. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
  8. Entrepreneurship

    Startup Analysis: How Much Is Palantir Worth?

    Learn about the private company Palantir, its valuation and how its valuation was derived. Understand how the company operates and if it deserves the valuation.
  9. Stock Analysis

    Jawbone: An IPO You Should Have on Your Radar

    Learn about the company Jawbone and how it has become successful with multiple product lines. Understand the benefits of investing in an IPO
  10. Economics

    What is a Free Rider Problem?

    In economics, the free rider problem refers to someone being able to get, for less or even for free, what others pay more for.
RELATED FAQS
  1. How can you find the demand function from the utility function?

    A consumer's budget constraint is used alongside the utility function to derive the demand function. The utility function ... Read Full Answer >>
  2. What are the different ways that utility is measured in economics?

    It's difficult to measure a qualitative concept such as utility, but economists try to quantify it in two different ways: ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  5. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  6. What are some examples of Apple and Google's best-selling product lines?

    There are many good examples of product lines in the technology sector from some of the largest companies in the world, such ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!