Why do indifference curves never cross

Assumptions of Indifference Curve Analysis: 1 The consumer acts rationally so as to maximise satisfaction. What are the uses of indifference curve? The indifference curve analysis has also been used to explain producer's equilibrium, the problems of exchange, rationing, taxation, supply of labour, welfare economics and a host of other problems.

Some of the important problems are explained below with the help of this technique. How do you determine the shape of an indifference curve? Shape of an Indifference Curve Indifference curves have a roughly similar shape in two ways: 1 they are downward sloping from left to right; 2 they are convex with respect to the origin.

In other words, they are steeper on the left and flatter on the right. Can indifference curves be thick? When we make a thick indifference curve, it violates the non-satiatioj assumption, which means that the point 2 in the figure has more quantity than point 1, but you are indifferent between them because they lie on same curve, which contradicts, so it cannot be possible. What is a convex indifference curve?

Convexity of indifference curves implies that the marginal rate of substitution of X for Y falls as more of X is substituted for Y. Thus, indifference curves are convex to the origin when principle of diminishing marginal rate of substitution holds good and which is generally the case.

Is indifference curve concave to the origin? To maintain the same level of utility, an increase in one good which reduces utility must be matched by a reduction in the other good which would increase utility. Therefore, the indifference curve is concave to the origin. Why are indifference curves convex to the origin? An indifference curve is convex to the origin because of the law of diminishing marginal rate of substitution. How do we make people want to buy our products?

People want to increase their utility. If someone is indifferent to trading an hour for a dollar, they would be excited to trade half an hour for a dollar. Conversely, they are uninterested in trading two hours for a dollar. Graphically, in addition to being indifferent to all points on their curve, they are excited about all points above their curve, and uninterested in moving to a point below their curve. Rational people and economists make a point of excluding irrational people from most of their work will at least be content, and usually prefer to increase their utility.

Indifference curves never intersect, because by definition, all points on the same curve represent equivalent satisfaction. If two curves were to overlap, then that would create a graph for a single individual that looked like the previous graph with red and green curves. The red data point must have the same utility as the place where the curves cross. The green data point will also have the same utility as the place where the indifference curves intersect.

Practical Application. Now that we understand how people treat tradeoffs, we can look at prioritization of requirements. The key is to recognize that there are tradeoffs. As creators of software, we are faced with internal tradeoffs. We can only accomplish so much. We can only release a certain number of features in a given timebox.

And we make those tradeoffs based on ROI, or our perception of the balance between costs and return. Sometimes return is measured in purely financial terms.

Sometimes, that return is measured in utility. Each point on an indifference curve represents a consumption bundle, and the consumer is indifferent among all consumption bundles on the indifference curve. In the graph below, point A illustrates the tangency condition the utility curve has with the budget line constraint. The tangency condition between the indifference curve and the budget line indicates the optimal consumption bundle when indifference curves exhibit typical convexity.

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