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Indifference Curve Analysis: Beyond Simplifying Assumptions

Author

Listed:
  • Walter E. Block
  • José Antonio Manuel Aguirre Sotelo

Abstract

This article presents the proper analysis of indifference curve systems once some of the simplifying assumptions used to teach beginning students are relaxed. First, the diminishing MRS assumption is relaxed to allow the existence of concave4 indifference curves. Then the more-is-better assumption is relaxed. This reveals a potential source of confusion for students: usually one can find the optimum of a system by choosing the point where the budget line touches the most northeastern indifference curve, but once the more-is-better assumption is relaxed, the preference order of the indifference curves becomes the main criterion – not geographical location. Once both assumptions are removed, we study the case where too much of a good thing can become a bad thing – that is, where the consumer can encounter satiation.

Suggested Citation

  • Walter E. Block & José Antonio Manuel Aguirre Sotelo, 2012. "Indifference Curve Analysis: Beyond Simplifying Assumptions," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 12(1), pages 7-12, Fall.
    • Handle: RePEc:mts:jrnlee:v:12:y:2012:i:1:p:7-12
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    File URL: http://frank.mtsu.edu/~jee/2012/2_MS1211_pp7to12.pdf
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    Citations

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    Cited by:

    1. José Antonio Manuel Aguirre Sotelo & Walter E. Block, 2014. "Indifference Curve Analysis: The Correct And The Incorrect," Oeconomia Copernicana, Institute of Economic Research, vol. 5(4), pages 7-43, December.
    2. Walter Block, 2019. "Rejoinder To Wysocki On Indifference And The Block-Hoppe Debate," Electronic magazine "Dialogue", D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 4 Year 20, pages 1-7.

    More about this item

    Keywords

    indifference curve; convex; concave; budget line;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General

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