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CONFIRMING PAGES

CHAPTER NINETEEN APPENDIX 375

FIGURE 4 The consumer’s equilibrium position. The
consumer’s equilibrium position is represented by point X, where the black CONSIDER THIS . . .
budget line is tangent to indifference curve I 3 . The consumer buys 4 units
of A at $1.50 per unit and 6 of B at $1 per unit with a $12 money income.
Points Z and Y represent attainable combinations of A and B but yield less Indifference
total utility, as is evidenced by the fact that they are on lower indifference Maps and
curves. Point W would entail more utility than X, but it requires a greater Topographi-
income than the $12 represented by the budget line.
cal Maps
12
The familiar top-
ographical map
10
may help you un-
derstand the idea
8 of indifference
Quantity of A 6 Y W ference maps. Each line on a topographical map represents a
curves and indif-

indifference curve represents a particular level of total utility.
4 X particular elevation above sea level, say, 4000 feet. Similarly, an
I 4
When you move from one point on a specific elevation line to
I 3
2 another, the elevation remains the same. So it is with an indiffer-
I 2
Z I 1 ence curve. A move from one position to another on the curve
leaves total utility unchanged. Neither elevation lines nor
0 2 4 6 8 10 12 indifference curves can intersect. If they did, the meaning of each
Quantity of B line or curve would be violated. An elevation line is “an equal-
elevation line”; an indifference curve is “an equal-total-utility
an indifference curve farther from the origin and thereby curve.”
increase the total utility derived from the same income. Why Like the topographical map, an indifference map contains
not point Z? For the same reason: Point Z is on a lower in- not just one line but a series of lines. That is, the topographical
difference curve, I . By moving “up” the budget line—by map may have elevation lines representing successively higher
1
elevations of 1000, 2000, 3000, 4000, and 5000 feet. Similarly,
reallocating dollars from B to A—the consumer can get on the indifference curves on the indifference map represent suc-
higher indifference curve I and increase total utility. cessively higher levels of total utility. The climber whose goal is
3
How about point W on indifference curve I ? While it to maximize elevation wants to get to the highest attainable
4
is true that W would yield a greater total utility than X, elevation line; the consumer desiring to maximize total utility
point W is beyond (outside) the budget line and hence is wants to get to the highest attainable indifference curve.
not attainable by the consumer. Point X represents the op- Finally, both topographical maps and indifference maps
timal attainable combination of products A and B. Note show only a few of the many such lines that could be drawn.
that, according to the definition of tangency, the slope of The topographical map, for example, leaves out the elevation
the highest attainable indifference curve equals the slope lines for 1001 feet, 1002, 1003, and so on. The indifference map
of the budget line. Because the slope of the indifference leaves out all the indifference curves that could be drawn be-
curve reflects the MRS (marginal rate of substitution) and tween those illustrated.
the slope of the budget line is P P , the consumer’s opti-
A
B
mal or equilibrium position is the point where extra utility he or she derives from each extra unit of A or B.
The consumer needs that information to realize the utility-
___
P B
MRS maximizing (equilibrium) position, as indicated by
P A
Marginal utility of B
(You may benefit by trying Appendix Key Question 3 at Marginal utility of A __________________
__________________

this time.) Price of A Price of B
The indifference curve approach imposes a less stringent
The Measurement of Utility requirement on the consumer. He or she need only specify
As indicated at the beginning of this appendix, an important whether a particular combination of A and B will yield more
difference exists between the marginal-utility theory of con- than, less than, or the same amount of utility as some other
sumer demand and the indifference curve theory. The mar- combination of A and B will yield. The consumer need only
ginal-utility theory assumes that utility is numerically say, for example, that 6 of A and 7 of B will yield more (or
measurable, that is, that the consumer can say how much less) satisfaction than will 4 of A and 9 of B. Indifference

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