Indifference Curve Analysis
Indifference Curve Analysis This theory was propounded by Hicks and Allen. The ordinal approach assumes that utility is not measurable. The ordinal approach employs the device of indifference curves for the purpose of determination of the consumer's equilibrium. A prudent consumer seeks to maximize his satisfaction from the purchases he makes, i.e., reach an equilibrium position. For this, a consumer must build up a scale of preferences on which all objects of desire or pursuit find their place, and which registers the terms on which they would be preferred one to the other. He builds up his scale of preferences from the commodities he consumes. A set of indifference curves plotted in an 'indifference map' determines the consumer's order of preferences. According to Leftwich: “A single indifference curve shows the indifferent combination of X and Y that yield equal satisfaction to the consumer.” According to Hicks: “It is the locus of the points representing parts of q...