What Are The Assumptions Of Indifference Curve Technique?


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The first three assumptions are necessary, the next two are convenient.

Rationality: Consumers know their individual preferences and can choose between consumption bundle X and consumption bundle Y. They know either that X is preferred to Y, Y is preferred to X, or that they are indifferent between X and Y.

Consistency: If a consumer chooses bundle X to bundle Y in the first instance, then he cannot choose bundle Y to bundle X in the second instance.

Transitivity: If a consumer prefers bundle X to bundle Y, and prefers bundle Y to bundle Z, then he must prefer bundle X to bundle Z.

Continuity: This means that you can choose to consume any amount of the good. For example, I could drink 11 mL of soda, or 12 mL, or 132 mL. I am not confined to drinking 2 liters or nothing. See also continuous function in mathematics.

Non-satiation: This is the idea that more of any good is always preferred to less.

Convexity: The marginal value a person gets from each commodity falls relative to the other good. In a two good world, if a consumer has relatively lots of one good he would be a happier with a little less of that good and a little more of the other.

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