ShmoopTube

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And finance Allah shmoop what is an indifference curve And

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no it doesn't have to do with a lazy pitcher

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or an architect You know who just doesn't care about

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the building anymore because he's about to get fired It

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has to do with how people make consumer decisions like

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what products they buy like what they choose and then

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care about and or what they're indifferent to Well the

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indifference curves graphs a choice between two products except well

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you just don't care what combination of the products you

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get You like the choice is equally when combined you

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would take a bunch of different combos and not notice

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the difference in value to you lungs You have that

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combo or bundle The total doesn't really matter to your

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indifferent to it right So not satisfied with a simple

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shrug emoji economists have decided this kind of indifference requires

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mathematical rigor and a graphing calculator hints thie indifference curve

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and indifference Curve is a graph It shows the Siri's

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of combinations of goods So here we go Example time

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once again no one invited you out this Friday night

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So you're gonna go to the store and buy snacks

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for your lonely Netflix binge Best You're going to go

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buy some bags of caramel corn and a bunch of

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packages of Twizzlers You graff your choices on an indifference

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curve Each point on the curve represents a combination of

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the volume of each of these sugary delights that makes

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you equally happy Well the X axis represents an amount

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of caramel corn The Y axis represents an amount of

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Twizzlers The curve consists of all the possible combos of

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two goods that you find equally app healing It's the

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line of Well I don't care You have no preference

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about the points on that line All the same Completely

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indifferent So three bags of caramel corn and two packs

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of Twizzlers mean the same to you as two bags

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of caramel corn and four packs of Twizzlers your indifferent

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or one bag of caramel corn and six packs of

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Twizzlers You're indifferent Or maybe you'll just get eight packs

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of Twizzlers and skip the caramel corn altogether You'll get

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none of it You're indifferent All of these packages mean

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the same to you Same value Same You know food

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is love and happiness kind of vibe Pull out some

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graphing paper while you're standing in the aisle of the

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convenience store Ignore the strange looks you get Yes we

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do that all the time Grafting indifference Curve on the

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curve Measures utility the amount of value you get out

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of the combo twizzlers and caramel corn A point above

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the curve is more utility So five bags of caramel

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corn and seven packages of Twizzlers Well much better You

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Khun Binge all night and into tomorrow but that's off

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of that indifference curve A point below the curve is

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less utility or less value to you One bag of

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caramel corn in one bag of Twizzlers Yeah not enough

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to get you through a single episode of House hunters

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much less utility or value They're not enough for the

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amount of Netflix you'll be binging upon but everything along

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the curve provides the adequate utility for what you're trying

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to do Enough food to get you through your sad

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Friday night of Netflix ng all the points on the

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curve providing the same amount of utility or value so

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How do you decide What combo Tobi Well if all

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the combinations are the same to you how do you

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choose which valuer Which combo value to go with And

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why are we doing this all again anyway Why graff

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your indifference Well the best way to use an indifference

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curve is to combine it with a budget constraint line

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A budget constraint represents the combinations of the two products

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for which you have enough money to buy Set another

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way Graphing A budget constraint between two items shows all

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the possible combinations that you can afford But once you

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get to the store you see what a package of

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caramel corn is A three dollars fifty cents There all

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the package Twizzlers is on sale for a buck You've

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got ten dollars in your pocket so check the points

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on your indifference Curve Three bags of caramel corn and

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two packs of Twizzlers would cost you twelve fifty Yeah

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you don't have that's more than your budget Two packs

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a caramel corn in four bags of Twizzlers When that

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costs eleven dollars it's a buck too much but one

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bag Caramel corn and six packs of Twizzlers Well that's

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nine fifty It's under your ten dollars budget and I

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guess that's what you'll buy Well on a graph you

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figure out the indifference curve all combinations that bring you

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equal value All these things are all equal to you

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in value And then you figure out your budget constraint

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curve all the combinations that you can afford to buy

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Well the point where the budget constraint line or restraint

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line meets the indifference Curve Boom That's the sweet spot

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That combo is the one to buy right here Now

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you just have to pick what you want to watch

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Another indifference curve sets in as you scroll endlessly through

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York Netflix options there Yeah you've got a rough life 00:04:26.423 --> [endTime] there Well you could just chill Yeah

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