What is Indifference Curve ?
A curve or a graphical representation of the combination of different goods providing the same satisfaction level to the consumer is known as Indifference Curve. One cannot put a numerical value on the level of satisfaction gained from the consumption of goods. However, they can tell their preference between two goods, i.e., which good gives them more or less satisfaction. This satisfaction level is depicted through an indifference curve.
As all the combinations provide the consumer with an equal level of satisfaction, they prefer the goods equally. In other words, at any point of the indifference curve gives the same satisfaction level to the consumer. The same satisfaction level gained by the different combinations of two goods makes the consumer indifferent; hence, the name indifference curve. Because of this reason, an individual can use the indifference curve to depict the demand pattern and preferences of a consumer for a different set of commodities.
What is Indifference Curve Analysis?
A process of analyzing a simple two-dimensional graph representing two goods, one on the x-axis and the other on the y-axis is known as an Indifference Curve Analysis. If the graph of the combination of goods is on the line or curve, it means that the consumer gains the same satisfaction level or utility from the goods and thus, does not have any preference for the goods. For example, a child may gain the same satisfaction level from one ice cream and two chocolates, or three ice creams and one chocolate.
What is Indifference Map?
When more than one curve is represented on a graph showing a different combinations of two different goods on each curve, it is known as an Indifference Map. Each indifference curve on that graph shows one satisfaction level all along the curve. In other words, the representation of consumer preferences by a number of indifference curves is known as an indifference map. An indifference map represents every possible indifference curve that the consumer has, which helps in ranking their preferences. Also, the combination of goods on the higher indifference curve gives a higher satisfaction level to the consumer. Therefore, the highest of the indifference curves of an indifference map is preferred by a consumer.
Here, IC1, IC2 and IC3 are three different Indifference Curves, and the complete graph is known as Indifference Map. Each curve has its own level of satisfaction. However, at any point on each of the curves gives the same level of satisfaction to the consumer. Also, the higher the indifference curve, the higher the satisfaction level (for example, IC3 > IC2).
What is Indifference Schedule?
A table or a schedule that shows different combinations of two goods giving the same level of satisfaction to the consumer is known as an Indifference Schedule. An indifference schedule is used to plot the different combinations of two goods on a graph for the formation of an indifference curve.
What is Indifference Set?
All points or bundles on an indifference curve that gives the same level of satisfaction to the consumer are known as Indifference Set. In simpler terms, suppose you have choices between different combinations of two things, like coffee and cookies. An indifference set would group together all the combinations that you find equally satisfying. For example, you might be equally happy with 2 coffees and 3 cookies, 1 coffee and 5 cookies, or even 4 coffees and 1 cookie. All these combinations offer you the same level of enjoyment, hence they belong to the same indifference set.