What does L shaped indifference curve mean?

Indifference curves are linear if the individual regards the two goods as perfect substitutes. They are L-shaped if the individual regards the two goods as perfect complements.

Which goods have L shaped indifference curves?

If two goods are perfect complements then the indifference curves will be L-shaped.

What is the shape of indifference curve in economics?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Description: Graphically, the indifference curve is drawn as a downward sloping convex to the origin. The graph shows a combination of two goods that the consumer consumes.

Why are complementary goods L shaped?

This is a graph that shows different combination of two goods which along the curve yield the same level of utility to the consumer.At any point in the along the curve, the consumer is indifferent between the two goods, where increase in consumption of one good will lead to a decrease in consumption of the other good.

Are L shaped indifference curves convex?

The shape of an indifference curve is convex to the origin and this is based on the principle of diminishing marginal rate of substitution.

What is a linear indifference curve?

An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.

Why is it called indifference curve?

An indifference curve is a curve that represents all the combinations of goods that give the same satisfaction to the consumer. Since all the combinations give the same amount of satisfaction, the consumer prefers them equally. Hence the name indifference curve.

What are indifference curves explain the consumer equilibrium?

Consumer equilibrium refers to a situation, in which a consumer derives maximum satisfaction, with no intention to change it and subject to given prices and his given income. So, a consumer always tries to remain at the highest possible indifference curve, subject to his budget constraint.

What is complementary goods in economics?

Meaning of Complementary Goods An object used in combination with another product or service is a complementary good or service. Usually, when consumed alone, the complementary good has little or no value. Still, when paired with another good or service, it adds value to the overall value of the bid.

When two goods are perfectly complementary The indifference curve is L shaped?

The slope of the indifference curve: If the two goods are perfect complements the indifference curve is right-angled or L shaped, as shown in Figure 43 (A). The vertical portion of the I1, curve reveals that no amount of reduction in good Y will lead even to a slight increase in good X.

What is indifference curve in economics PDF?

○ An indifference curve is a locus of all. combinations of two goods which yield the. same level of satisfaction (utility) to the consumers. ○ Since any combination of the two goods on an. indifference curve gives equal level of.

What are the principles of an indifference curve?

Key Takeaways An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown-i.e. Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.

What are the features of an indifference curve?

The very important feature of the indifference curves is that they are convex to the origin and they cannot be concave to the origin. A normal indifference curve will be convex to the origin and it cannot be concave. Only convex curves will lend to the principles of Diminishing Marginal Rate of substitution.

What are types of indifference curve?

Indifference curve will not touch the axis. Another characteristic feature of indifference curve is that it will not touch the X axis or Y axis. This is born out of our assumption that the consumer is considering different combinations of two commodities.

How to draw indifference curves?

In general, any combination that lies above and to the right of an indifference curve is preferred to any point on the indifference curve. We can draw an indifference curve through any combination of two goods.