How do you derive a demand curve from an indifference curve?
At the utility-maximizing solution, the consumer’s marginal rate of substitution (the absolute value of the slope of the indifference curve) is equal to the price ratio of the two goods. We can derive a demand curve from an indifference map by observing the quantity of the good consumed at different prices.Click to see full answer….
At the utility-maximizing solution, the consumer’s marginal rate of substitution (the absolute value of the slope of the indifference curve) is equal to the price ratio of the two goods. We can derive a demand curve from an indifference map by observing the quantity of the good consumed at different prices.Click to see full answer. Similarly one may ask, how do you derive the demand curve through indifference curve?8.47 money is measured on the Y-axis, while the quantity of the good X whose demand curve is to be derived is measured on the X-axis. An indifference map of a consumer is drawn along with the various budget lines showing different prices of the good X. Budget line PL1 shows that price of the good X is Rs. 15 per unit.Similarly, what are the properties of indifference curve? There are four important properties of indifference curves that describe most of them: (1) They are downward sloping, (2) higher indifference curves are preferred to lower ones, (3) they cannot intersect, and (4) indifference curves are convex (i.e. bowed inward). Accordingly, how is a demand curve derived? To derive a market demand curve, simply add the quantities that each consumer buys at each price. The prices on the vertical axis do not change, but the quantities on the horizontal axis are the sums of the consumers’ demand. This group of quantities is called horizontal summation.What do you mean by indifference curve?Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.
