Page 62 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-4: Ordinal Utility Theory: Indifference Curve Approach

4.10 Some Exceptional Shapes of Indifference Curves Notes

Following figure shows some exceptions of indifference curve.
1. Exception 1: Straight Line Indifference Curve – Perfect Substitutes: If commodity X and Y are
perfect substitutes, then the marginal rate of substitution (MRS) will be 1:1. Two goods are substituted
when consumer will substitute one commodity for another at constant rate. For perfect substitute
goods the indifference curve is straight line as shown in Fig. 4.12. By the slope of these curves the
substitution rate of two goods is clarified.

Fig. 4.12

Y
X & Y are Perfect Substitutes:
IC for Perfect Substitutes
is Straight Line
Y-Commodity

IC
IC 2
1
O X
X-Commodity

2. Exception 2: L-shaped (Right Angled) Indifference curve: Perfect complements: Indifference curve
of perfect complements, as shown in Fig. 4.13 is L-shaped (Right Angle). Perfect complementary
goods are those which are used simultaneously in the definite ratio for instance, right shoe and
left shoe are perfect complement because one is useless without the other. When consumer has its
minimum number then there is no rate at which one shoe be substituted for another.

Fig. 4.13
Y
Perfect Complements
L-Shaped IC Curve

Right Shoe

IC
2
IC
1
O X
Left Shoe

3. Exception 3: Horizontal Indifference Curve – Goods that give zero satisfaction: When any product
yields zero satisfaction then the consumer will not want to sacrifice even the last quantity of the other
product to get a single unit of that product. For instance, indifference curve of cigarettes for a non-
smoker, as shown in Fig. 4.14, will be a straight line. Indifference curve of that product which yields
zero satisfaction, will be parallel to OX (at which product yielding zero satisfaction is shown).

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