In the general course of microeconomics, two key approaches are distinguished: quantitative and ordinal. The first is based on the fact that the consumer evaluates the usefulness of the benefits that he acquires. However, such an assumption in reality cannot be transferred to almost any comparison of purchased goods. For example, you want to buy pants and shoes, but how can you evaluate the usefulness of both? Of course, choosing between the first and second, you give preference to the basic necessities, but it is impossible to even imagine how much percent this item is more useful than the other. The task is complicated as the number of goods increases, when whole sets already fall into the comparison.
In order to make it possible to study the usefulness of the acquired product or service in practice, an ordinalistic (ordinal) approach was created. This teaching follows from a quantitative assessment, but due to a different principle of comparison, it is more widespread in practice.
The basis of the ordinal approach is that the consumer does not assess the usefulness of a particular good, but sets peculiar priorities in accordance with personal preferences, the surrounding situation, and public opinion.
To implement the theory of the ordinal approach, it is accepted that a certain consumer buys bundles of goods and compares their utility subjectively. In this situation, for analysis, you can use the plane on which the indifference curve is placed.
On the ordinate axis, the usefulness of one set of goods is laid off, on the abscissa, the second set. If several sets are involved in the assessment at the same price, but with a different degree of benefit for the consumer, we get a card of indifference. On such a map, the indifference curve is not the only one - there are several disjoint lines, and the higher one of the graphs is, the greater the usefulness of the set of benefits.
It is important to understand what indifference curves mean and their properties. If with the former everything is quite clear - they allow you to evaluate the relative degree of usefulness of different sets of goods and choose the most optimal component for different consumer sets of products for the consumer, then there may be difficulties in analyzing the latter. The fact is that any indifference curve is convex and has a negative slope. How can such line characteristics be economically explained?
A negative slope means that an increase in the amount of goods from one set leads to a decrease in goods from the second set. Indeed, it is easy to imagine in practice! The more we buy one product, the less we can buy a second, having any one final amount of money. The convexity that any indifference curve has is inextricably linked with the concept of the marginal rate of substitution and explains the increase in the relative price of one set of goods relative to another, depending on the number of products.
Indifference curves do not necessarily take the form of descending lines. Sometimes in practice degenerate cases occur, and the graph is converted into a straight line, horizontal or vertical. Suppose that a consumer does not need one set of benefits under any circumstances. Then such a consumer will not give a single set of other good to get an unnecessary thing. In such cases, the indifference curve is parallel to the abscissa axis. If the situation repeats exactly the opposite - the “curve” is parallel to the ordinate axis.
In conclusion, we note that the indifference curve is a very important concept in the economy that allows you to apply theory in practice, comparing the tastes and preferences of not only one particular consumer, but also groups of customers, which is very important for studying the demand for individual groups of goods.