NOTES– Properties of IC

Guidance – Assignment 2 – IC Analysis
9708/42/F/M/19
(Explain why indifference curves are usually drawn convex to the origin, are downward sloping and do
not cross each other. [12]
Mark Scheme-
Explanation of diminishing marginal utility, and how more of a good is preferred to less of a good so the
curves cannot cross; they have an ‘indifferent’ response along them representing a constant level of
utility.
L4 (9–12 marks): for a clear analysis of ICs and all three parts of the question.
L3 (7–8 marks): for a less competent explanation of at least two of the parts of the question or a weaker
explanation of all three parts.
L2 (5–6 marks): for a competent explanation of one part or a weak explanation of two elements of the
question.
L1 (1–4 marks): for an answer that has some basic correct facts but includes irrelevancies and errors
of theory.
Examiner’s Report-
This question asked about indifference curves. It was expected that candidates would give an
explanation of the link between the construction of the indifference curve and how a consumer would
have an ‘indifferent’ response along them representing a constant level of utility. The link between the
downward slope and the principle of diminishing marginal utility, and how more of a good is preferred
to less of a good so the curves cannot cross was also necessary. Many answers covered all three
elements in the question. The weaker answers did not explain fully enough why the curves were
downward sloping.
Guidance-
https://economicsconcepts.com/properties_of_indifference_curves.htm
(1) Indifference Curves are Negatively Sloped:
The indifference curves must slope down from left to right. This means that an indifference curve is
negatively sloped. It slopes downward because as the consumer increases the consumption of X
commodity, he has to give up certain units of Y commodity in order to maintain the same level of
satisfaction.
In fig. 3.4 the two combinations of commodity cooking oil and commodity wheat is shown by the points
a and b on the same indifference curve. The consumer is indifferent towards points a and b as they
represent equal level of satisfaction.
At point (a) on the indifference curve, the consumer is satisfied with OE units of ghee and OD units of
wheat. He is equally satisfied with OF units of ghee and OK units of wheat shown by point b on the
indifference curve. It is only on the negatively sloped curve that different points representing different
combinations of goods X and Y give the same level of satisfaction to make the consumer indifferent.
(2) Higher Indifference Curve Represents Higher Level:
A higher indifference curve that lies above and to the right of another indifference curve represents a
higher level of satisfaction and combination on a lower indifference curve yields a lower satisfaction.
In other words, we can say that the combination of goods which lies on a higher indifference curve will
be preferred by a consumer to the combination which lies on a lower indifference curve.
In this diagram (3.5) there are three indifference curves, IC1, IC2 and IC3 which represents different
levels of satisfaction. The indifference curve IC3 shows greater amount of satisfaction and it contains
more of both goods than IC2 and IC1 (IC3 > IC2 > IC1).
(3) Indifference Curve are Convex to the Origin:
This is an important property of indifference curves. They are convex to the origin (bowed inward).
This is equivalent to saying that as the consumer substitutes commodity X for commodity Y, the
marginal rate of substitution diminishes of X for Y along an indifference curve.
In this figure (3.6) as the consumer moves from A to B to C to D, the willingness to substitute good X
for good Y diminishes. This means that as the amount of good X is increased by equal amounts, that
of good Y diminishes by smaller amounts. The marginal rate of substitution of X for Y is the quantity of
Y good that the consumer is willing to give up to gain a marginal unit of good X. The slope of IC is
negative. It is convex to the origin.
(4) Indifference Curve Cannot Intersect Each Other:
Given the definition of indifference curve and the assumptions behind it, the indifference curves
cannot intersect each other. It is because at the point of tangency, the higher curve will give as much
as of the two commodities as is given by the lower indifference curve. This is absurd and impossible.
In fig 3.7, two indifference curves are showing cutting each other at point B. The combinations
represented by points B and F given equal satisfaction to the consumer because both lie on the same
indifference curve IC2. Similarly the combinations shows by points B and E on indifference curve
IC1 give equal satisfaction top the consumer.
If combination F is equal to combination B in terms of satisfaction and combination E is equal to

combination B in satisfaction. It follows that the combination F will be equivalent to E in terms of
satisfaction. This conclusion looks quite funny because combination F on IC2 contains more of good Y
(wheat) than combination which gives more satisfaction to the consumer. We, therefore, conclude that
indifference curves cannot cut each other.
(5) Indifference Curves do not Touch the Horizontal or Vertical Axis:
One of the basic assumptions of indifference curves is that the consumer purchases combinations of
different commodities. He is not supposed to purchase only one commodity. In that case indifference
curve will touch one axis. This violates the basic assumption of indifference curves.
In fig. 3.8, it is shown that the in difference IC touches Y axis at point C and X axis at point E. At point
C, the consumer purchase only OC commodity of rice and no commodity of wheat, similarly at point
E, he buys OE quantity of wheat and no amount of rice. Such indifference curves are against our
basic assumption. Our basic assumption is that the consumer buys two goods in combination.
Derivation of the individual demand curve from the price consumption curve.
https://wikieducator.org/DERIVATION_OF_THE_DEMAND_CURVE

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Guidance – Assignment 2 – IC Analysis

(1) Indifference Curves are Negatively Sloped:

(2) Higher Indifference Curve Represents Higher Level:

(3) Indifference Curve are Convex to the Origin:

If combination F is equal to combination B in terms of satisfaction and combination E is equal to

(5) Indifference Curves do not Touch the Horizontal or Vertical Axis:

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