Indifference Curve Analysis: An Alternative Approach to Understanding Consumer Choice

Read this section to learn about indifference analysis. Attempt the "Try It” problems at the end of the section before checking your answers.

1. Introduction


  • Explain utility maximization using the concepts of indifference curves and budget lines.
  • Explain the notion of the marginal rate of substitution and how it relates to the utility-maximizing solution.
  • Derive a demand curve from an indifference map.

Economists typically use a different set of tools than those presented in the chapter up to this point to analyze consumer choices. While somewhat more complex, the tools presented in this section give us a powerful framework for assessing consumer choices.

We will begin our analysis with an algebraic and graphical presentation of the budget constraint. We will then examine a new concept that allows us to draw a map of a consumer's preferences. Then we can draw some conclusions about the choices a utility-maximizing consumer could be expected to make.

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