Indifference Curve


DEFINITION of 'Indifference Curve'

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


Indifference Curve


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.

  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

    The Law Of Diminishing Marginal Utility is a law of economics ...
  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. Crowding Out Effect

    An economic theory stipulating that rises in public sector spending ...
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

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  4. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  5. Economics

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  6. Economics

    What Does Short Run Mean?

    Short run is the concept that for a business, at least one factor of production is fixed while others are variable.
  7. Investing

    Did the Fed Miss its Window to Raise Rates?

    The debate in the media over whether the Federal Reserve will announce liftoff this month or in December continues to rage on.
  8. Economics

    What's a Price Ceiling?

    A price ceiling is the maximum amount a seller can charge for a product or service.
  9. Economics

    Explaining Industry

    The term industry refers to a classification of companies that share similar business activities.
  10. Economics

    The 4 Industries Driving New Mexico's Economy

    Discover the four primary industries that are considered to be the most important drivers in the well-being of the economy of New Mexico.
  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. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
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!