 Namaskar dear learners. Today we will discuss about the Indifference Card Technique which is included in your paper Introduction of Economic Theory 1. I am Parag Dutta from Krishna Kanta handed State Open University. So in this class we will discuss about initially the basics concepts of Indifference Curve. Then we will discuss about Indifference Curve and Indifference Map. Then we will go for a Parties of Indifference Curve. Then consumers will live in through Indifference Curve approach. After that we will try to see the price effect in terms of income effect and substitution effect. So to start with this class what we will do? We will talk about the concept of Indifference Curve. The Indifference Curve technique was conceived as an alternative to the cardinal utility approach. A number of economies has contributed to this technique over the years and recently it was Slavsky, then J.R. Hicks and R. G. L. N. who contributed towards development of Indifference Curve theory. Now what is the basis of Indifference Curve or you know which is also known as Cardinal Utility Approach. Actually the Cardinal Utility Approach was criticized by various economics on the ground there you know because it assumed that the utility can be measured in quantitative term which is not true because utility is a subjective concept which cannot be measured by putting some numbers. So, Ordinal Utility Approach but they adopt they are of the view there although utility cannot be measured in cardinal term that means in numeric forms but one can rank or give difference to different bundle of goods that means they can refer one bundle of goods as compared to another bundle of goods. So based on their different schedules one can draw a Indifference Curve or we can derive the Indifference Curve. Now when you are talking about the Ordinal Utility Approach it is basically the main technique is Indifference Curve and Indifference Schedule. Now what is Indifference Curve? In simple language Indifference Curve is a locus of or you can say combination of points. Points means the combination of commodities that gives same level of satisfaction to the consumer. That means along a Indifference Curve whatever point a consumer choose he will gain the same level of satisfaction. Now the basis of drawing a Indifference Curve is the Indifference Schedule. Now whenever you are talking about schedule it implies the various combination of these two goods. So Indifference Curve is drawn on the basis of Indifference Schedule and Indifference Schedule is nothing but combination of various commodities which yield the same level of satisfaction to the consumer. Now another concept is also there Indifference Map. Now what is Indifference Map? Indifference Map shows all the Indifference Curve which rend the preference of the consumer. So when as a rational consumer a consumer always try to attain or move to a higher Indifference Curve because it will give them more level of satisfaction provided his income. I will discuss this later. Next we will discuss about the assumption of the Indifference Curve. Now in any social science whether it is economics or political science the theories are basically based on certain assumptions. Now the theories valid only assumptions are fulfilled. So Indifference Curve is not an exception it is also based on certain assumptions. Now we will discuss about the assumptions of Indifference Curve. The first assumption is that utility can be measured ordinarily. That means as I have already told you that they have reject the concept of cardinal utility but they are the view that although utility cannot be measured cardinally but it is possible to measure utility ordinarily. Now the second assumption is that the consumer is rational. Now it is a common assumption for most of the theories or you can say all the theories of economics that the consumer is assumed to be rational. So that means the consumer must behave in a rational way. It implies that even his income and even the prices of the two commodities, consumer will always try to attain the highest level of satisfaction by distributing his or her income in different commodities. Next assumption is additive utility. That means utility can be added. The total utility of a consumer is the addition of utility he enjoys by consuming different commodities. In other words the quantities of commodities that is consumes determines the total utility of the consumer. Next consistency of sources means a consumer must be consistent in his sources. The source of the consumer is consistent in the sense that if he or she suges combination A over B in any one period that means he or she will not choose B over A in another period. Symbolically if A is greater than B in one situation it must be applicable to all other situations also. Next transitivity of consumer source. It implies that if a consumer prefer combination A over combination B and combination B over combination C then the consumer must require combination A over combination C. That means if A is greater than B and B is greater than C then A must be greater than C. So these are basically the properties of the indifference, assumptions of the indifference curve. Now the properties of the indifference curve. What are the basic properties of that? The first properties of indifference curve is that indifference curves are downward sloping towards the right. Why it happens? Because the consumer suges to move along an indifference curve then he or she has to sacrifice some units of one group to obtain an additional unit of other group. In other words when a consumer moves from one point to another point on an indifference curve he has to sacrifice the one unit of a commodity to gain another unit with a particular commodity and as a result indifference curve is always downward sloping and negatively sloping. The next properties of indifference curve is that indifference curves are convex to the horizontal. The convexity of the indifference curve is basically due to the working of the principle of diminishing marginal rate of substitution. Now what is marginal rate of substitution? Marginal rate of substitution means the rate at which one commodity can be substituted for another. Suppose if I am saying that if a consumer consuming say two commodities commodity X and commodity Y. Now consumer wants to increase the consumption of commodity X and he wants to reduce the consumption of commodity. Now suppose to gain an additional unit of commodity X if the consumer has to sacrifice four units of commodity Y then marginal rate of substitution is equal to 4. So this is known as marginal rate of substitution. It implies the rate at which one commodity can be substituted for another. Now the indifference curve is convex because the diminishing rate of marginal rate of substitution and this is obvious because while a consumer substitute one commodity for another then the rate of substitutability is really declined. Next the properties of indifference curve is that the indifference curve cannot intersect. This is another important properties of indifference curve. That means no indifference curve intersect. This means that only one indifference curve can pass through a point of indifference. Now if two indifference curve intersect with one another that will give contradictory results. Then the point of intersection will give contradictory results because the point of intersection will be on two indifference curve. Now a higher level of indifference curve must give higher level of satisfaction compared to a lower level of indifference curve. Now if the indifference curve intersect one another then then a higher level of indifference curve may not give higher level of satisfaction. Then the lower level of indifference curve is possible. That is why indifference curve cannot intersect each other. And last but not the least properties of indifference curve is that the indifference curve cannot pass each other. It is almost same to the property number three. Now we have already discussed about the assumptions of indifference curve and the properties of indifference curve. Now we are in a position to explain consumers equilibrium with the technique of indifference. Now in this section we will discuss about the equilibrium of a consumer using the indifference curve approach. Now to derive the consumer's equilibrium under indifference curve approach what we have to do we have to explain the indifference curve along with budget. Now what is budget line? A budget line is an important concept in the indifference curve. It is defined as the various combination of the two commodities that a consumer can consume even the income and price of the two commodities. Now a budget line is drawn on the basis of the income of the consumer and prices of the two commodities. Now the slope of the budget line is nothing but the ratio of the prices of the two commodities. And the slope of the indifference curve is given by the marginal rate of substitution as I have discussed already discussed. Now a consumer is in equilibrium when the slope of the indifference curve is equal to slope of the budget line. In other words when the budget line is tangent to the indifference curve then the consumer is in. Now in the diagram as we have seen that a consumer will always try to move to a high indifference curve say IC3. But he is not able to do so because he has limited income and he will not restrict himself in IC1 because that will give him the least level of satisfaction. So as a result the consumer will be in equilibrium at point E where the where the budget line is tangent to the indifference curve. Thus given the budget line the consumer would like to maximize his satisfaction by climbing on the highest indifference curve. Next we will talk about the limitation of the indifference curve. Although indifference curve technique is assumed to be superior as compared to cardinal utility approach but it has lots of limitations. The first limitation of indifference curve technique is there. The indifference curve technique does not tell us anything mean and it is considered to be a old wine in a new bottle. That means the indifference curve explained whatever already explained by the cardinal utility analysis they have only using a different technique. The second assumption or second limitation of indifference curve is that it assumes that the consumer is very familiar with the anterior preference sheet. This is actually not the case in real life. It is not possible that a consumer is always familiar with the anterior preference sheet. Another limitation of indifference curve is there. That technique can be efficiently applied only in case of two commodities. Once more than two commodities are here the analysis become common. So these are basically limitation of indifference curve. So in this partial class or in this online class initially we have talked about the ordinal utility analysis why ordinal utility analysis is considered to be superior to cardinal utility analysis. Next we discussed about indifference curve and indifference schedule then indifference map. Then we talked about the assumption of indifference curve then properties of indifference curve. Then we try to see how the consumer is in equilibrium by applying the technique of indifference curve and passage by. So I hope from this class you got some ideas about the indifference curve technique. So thank you for attending this class.