Properties of Indifference Curve

1. Indifference Curve always slopes downwards from left to right

An indifference curve is defined as a curve that gives an equal level of satisfaction to a consumer at every possible combination. It is possible when a consumer is willing to sacrifice some quantity of a good to gain an additional unit of another good. If a consumer is having more of a good without any fall in another good, the consumer will achieve a higher satisfaction level instead of equal. This fall in units of one good to gain more of another good gives a downward slope to the indifference curve. 

2. Indifference Curves are always convex to the point of origin

The shape of an indifference curve is based on the Diminishing Marginal Rate of Substitution. It means that to gain a single extra unit of a good, a consumer is willing to sacrifice more of another good. As in the case of Nisha (example above), to gain one more unit of chocolate, she is willing to sacrifice more units of ice-creams. This diminishing marginal rate of substitution gives a convex shape to an indifference curve.

However, there are two extreme scenarios for the shape of an indifference curve. 

• When two goods are the perfect substitute for each other, the shape of the indifference curve is a straight line. In this case, the Marginal rate of substitution is constant.
• When two goods are perfectly complementary to each other, the shape of the indifference curve is L-shaped and is convex to the origin. 

As it can be seen in the above image, to attain an additional unit of Good X, i.e., to move from 1 unit to 2 units, the consumer has to sacrifice some units of Good Y, i.e., 3 units (from 10 units to 7 units). 

The Diminishing Marginal Rate of Substitution refers to the consumer’s willingness to part with less and less quantity of one good to gain one more additional unit of another good. 

3. Higher Indifference Curves represent a higher level of satisfaction

A higher indifference curve represents a higher level of satisfaction, or we can say that an indifference curve to the right of another gives more satisfaction. This property of the indifference curve is based on the assumption of monotonic preference. Monotonic Preference means that a consumer will always prefer a larger bundle, as it gives him/her a higher satisfaction level. In other words, as a consumer prefers more goods, and a higher indifference curve will give a higher satisfaction level.

After comparing points A and B on IC₁ and IC₂, respectively, it can be seen that Bundle A involves OC of Good X and OE of Good Y. However, Bundle B involves OD of Good X and OF of Good Y, which shows that the consumer has more goods in Bundle B, which implies more utility or satisfaction level. Therefore, a higher indifference curve means a higher level of satisfaction. 

4. Two Indifference Curves cannot intersect each other

An indifference curve consists of different combinations of two goods giving the same satisfaction level to a consumer. It means that every point on an indifference curve gives the same satisfaction to the consumer. Also, an indifference map consists of different indifference curves with different satisfaction levels in each curve. If two indifference curves intersect with each other, it would mean that one point on each curve gives the same level of satisfaction which contradicts the meaning of an indifference map. Therefore, two indifference curves never intersect each other. 

If the above figure is true and two indifference curves IC₁ and IC₂ intersect each other, then it would mean that Point C provides the same satisfaction level to the consumer. However, it has already been proved under Indifference Map that two indifference curves on a single graph show different satisfaction levels along the curve. Therefore, two indifference curves can never intersect each other. 

5. An Indifference Curve never touches either of the axes

The indifference curve is based on the assumption that a consumer considers different possible combinations of two goods and wants both goods. If an indifference curve touches either of the axes, it would mean that a consumer is consuming the whole of one good only, which is not possible and contradicts the assumption. Therefore, an indifference curve never touches either of the axes.