Friday, May 29, 2009

Micro-economics, Indifference Curve, Properties of Indifference Curve: 2: Non-Intersecting

2: Non-Intersecting:
The second property of indifference curve is that they do not intersect each other. They always remain parallel to each other. The main defect of intersection of indifference curve is expained with the help of the following diagram:

In this figure two indifference curve Ic and Ic2 are intersecting each other at point C. This shows that point C lies on both indifference curves, which means both points A and C are on the same indifference curve Ic2 and consumer must be indifferent between A and C combinations. Similarly, point B and C are on the same indifference curve Ic, and consumer must be indifferent between B and C combinations. But this cannot be true because point A lies on higher indifference curve Ic2 and point B lies on lower indifference curve Ic. Therefore point A must be preferred to point B. Thus the intersection of indifference curve violates the assumption of more of the both goods is preferred to less of the both goods. Therefore it follows that indifference curve cannot intersect each other.

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