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Pavitar Parkash Singh, Lovely Professional University Unit-4: Ordinal Utility Theory: Indifference Curve Approach

Notes
Unit-4: Ordinal Utility Theory: Indifference
Curve Approach

CONTENTS
Objectives

Introduction

4.1 What is an Indifference Curve?
4.2 Indifference Schedule

4.3 Graphical Presentation of Indifference Curve
4.4 Indifference Map

4.5 Constant Marginal Rate of Substitution

4.6 Why does the Marginal Rate of Substitution Diminish?
4.7 Comparison of the Law of Diminishing Marginal Utility and the Law of Diminishing
Marginal Rate of Substitution
4.8 Assumptions of Indifference Curve Analysis

4.9 Properties of Indifference Curves
4.10 Some Exceptional Shapes of Indifference Curves

4.11 Budget Line or Price Line
4.12 Properties of Budget Line

4.13 Shifting of the Budget Line or Price Line

4.14 Consumer’s Equilibrium
4.15 Two Basic Conditions of Consumer’s Equilibrium

4.16 Effect of Change in Commodity Price on Consumer’s Equilibrium
4.17 Price Effect

4.18 Income Effect
4.19 Substitution Effect

4.20 Identification of Substitution Effect and Income Effect of Splitting Price Effect into
Substitution Effect and Income Effect

4.21 The Hicksian Approach

4.22 Giffen’s Paradox

LOVELY PROFESSIONAL UNIVERSITY 41