Microeconomics (2067Q2): What are the characteristics of Indifference Curve? How it is superior to the traditional Demand Curve?

Characteristics of Indifference Curve (IC)

1. The slope of IC is negative i.e. it slope downwards from left to right. For example, if the quantity of one commodity is increased, the quantity of other commodity must be decreased in order to stay at the same level of satisfaction.
2. ICs are convex to origin.
3. ICs don't intersect each other. If they did, the point of intersection would imply different level of satisfaction which is not possible from the definition itself and from the assumption of "transitivity".
4. Higher IC represents higher level of satisfaction. It means – the further away an IC from the origin, higher the level of utility it demonstrates.

Indifference Curve (IC) is superior to the traditional Demand Curve due to following reasons:

1. IC analysis is more realistic in measuring utility.
2. Free from the defect of independent utility.
3. Free from unrealistic assumption of constant marginal utility of money.
4. Based on less assumption.
5. Explanation of income and substitution effects.
6. Explanation of Giffen's Paradox.