Fundamental Assumptions of Indifference Curve Analysis

Responsible Consumer:

Fundamental Assumptions of Indifference Curve Analysis. The consumer is believed to be behaving rationally. In the sense that he will pick the combination from among the different possible combinations, considering the costs of products and money revenue, which gives him full pleasure.

Ordinary Utility:

The utility is incalculable, but more equivalent. It presumes that the customer is able to associate various degrees of happiness with each other. The utility can be described in terms of regular numbers, i.e. First, second, third, and so forth. In ordinary numbers, it is more common to name indifference curves as I, II, III, IV, etc.

Decreasing Marginal Substitution Rate:

A study of the indifference curve assumes a decreasing marginal substitution rate. This implies that, as the stock of a product rises with the consumer, he replaces it at a declining rate for the other product.

Model Two Products:

There are two x and y products. It provides the costs of the two products. The customer has full knowledge of the prices of the items on the market.

Assumption of continuity:

Ensures that all possible varieties of products may be ordered or graded by the customer due to the satisfaction they generate.

The scale of Choice:

The customer arranges the two products on a scale of choice, which means that the products have both preference and indifference. In his order of choice, he is expected to rate them and may state whether he prefers one mixture to the other or is indifferent to them.

Transitivity:

With respect to preference and aversion, this study implies transitivity. This implies that if the mixture of A is preferable to B, and B is preferable to C, then A is preferable to C as well. Similarly, if the consumer is oblivious to the A and B and B and C combinations, then the consumer is oblivious to the A and C combinations.

Consistency of Selection:

There is consistency in the actions of buyers. It means that if a customer chooses a combination of products to B at any given time, then the combination of B would not be preferred to A at another time.

Non-Satiety:

A customer has no goods in excess of the quantity demanded. The level of satiety he does not achieve. Consumers prefer a good quantity over a smaller quantity.

Weak Ordering:

The study of the indifference curve is based on the ‘Weak Ordering’ preference hypothesis method. It means that for two variations, there is a risk of the customer becoming indifferent. The poor order thus accepts the relationship between preference and indifference. The user may, for instance, prefer A to B, or B to A, or maybe indifferent to A and B. Strong ordering, on the contrary, suggests that only the relation of choice will occur. A is preferred to B or B is preferred to A, without the probability of ignorance between A and B by the customer. Thus, only the relation of choice is admitted by the strong ordering. If a consumer is given to choose from two combinations of A and B, the strong order means that he prefers A to B, while the weak order means that B is not preferred to A, which implies that the consumer either prefers A to B or is indifferent to A and B.

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