Indifference curve

The alternatives between which an individual has to decide may be actions, or states of affairs or intricate combinations of actions and consequences. But it may be useful at this stage to consider the simple case of an individual s choice between alternative quantities of commodities (or characteristics) which are constrained to lie within a convex set. Fig. 1 illustrates the case with two goods, the chosen quantities of which cannot lie outside the convex set bounded by CS and the two axes, and two alternative points of view, or forms of assessment Ix is the highest indifference curve achievable with respect to the first ordering (point of view) and /j that for the second ordering. For any given ordinal representation of u(( ) and u2( ), as we... 

The Tacit Economics of Modeling Indifference Curves that Should Defy Indifference... 

THE TACIT ECONOMICS OF MODELING INDIFFERENCE CURVES THAT SHOULD DEFY INDIFFERENCE... 

Figure 1. Trade-off curve, indifference curve and surrogate worth function.

As illustrated in Figure 1, the surrogate worth trade-off method provides a means of locating the preferred (or optimal) solution by determining the point of tangency between the trade-off curve (function) and the so-called indifference curve (function). 

This is also demonstrated numerically in the example presented in the preceding section. An indifference surface (or curve) is defined as a locus of different conditions in the objective space, any two of which cannot be distinguished by the preference criterion of the decision maker. An indifference curve or Surface can be expressed in terms of the value function, v(f), as... 

This curve is called an indifference curve. Higher levels of satisfaction can be realized by manipulating these curves by offering more of one feature or another and altering the tremendous number of variables in which people are interested (e.g.,... 

Indifference curve of comfort level versus towing capacity. 

This is an indifference curve, the locus of all points p,., pg) such that PW = 0, which is in fact the break-even line. The solid portion of the line represents the set of possible outcomes (-6% Pr — + 4%) and (-14% Pq +7%). 

One large class of techniques for constructing veilue functions is a direct application of ctilculus. These methods are usutilly based on the construction of approximate indifference curves. This class includes methods using trade-off ratios, tangent pltmes, gradients, and line integrals. Some of these methods are discussed in Yu (1985). 

The condition on A is satisfied by meeting the constraint u = uq.) The first-order conditions hold if there is an interior solution in other words, if the optimal compensation package includes, as seems reasonable, at least some wages and some safety. The second-order conditions necessary to show that we have a minimum over all possible combinations of w and s meeting uq will not be taken up, although the assumptions on the curvature of employer cost and worker indifference curves are sufficient to satisfy them. 

H is upward-sloping because an increase in safety, if it is to leave profits unaffected, must be accompanied by a corresponding increase in prices, and vice versa. It is convex (flatter in the low s region, steeper in high s region) because it can be assumed that it is increasingly costly to provide additional safety as more total safety is provided. Incidentally, the location of the cost curves rather than the indifference curves determines H, since firms are constrained to occupy those particular isocost curves by the zero-profit assumption, whereas the existence of consumer surplus means that the level of utility obtained by consumers may vary. 

Consumers form their preferences for the two goods according to the properties they possess. The individual preferences of users determine the relative weights given to the various characteristics in making choices. Indifference curves of the collective consumption of users of one country for the two goods have the usual property of strict convexity and can hit axes, i.e. the products are not essential. The model assumes that both goods are offered in all countries. I confine the... 

An indifference curve is a group of combinations of goods with the same utility, so that any combination on the curve is preferred. In this context I understand preferences as an ordering of choices of goods according to a utility function (Deaton, Muellbauer 1982, p. 25). 

During the substitution process the indifference curve is switched (from hago to Iiagi), because of an income effect that accompanies the substitution effect. The income effect means that the nominal decrease of the price of one good increases total utility, see Deaton, Muelbauser (1980, p. 35-36). 

Figure 3-6 depicts this mechanism of relative benefit increases. Preferences in the two countries are initially different because the benefit of the two designs is initially different in the two national environments. Figure 3-6 shows two representative indifference curves for the lead market and the lag market at time to. The... 

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