What is the difference between a budget line and an indifference curve

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Solution

A budget line represents the different combinations of two goods that are affordable and are available to a consumer given his/her level of income and the market prices of the goods. On the other hand, an indifference curve depicts various combinations of two goods that provides a consumer with the same level of satisfaction.
The basic difference between budget line and indifference curve is on the basis of affordability. While budget line takes into account the affordability of the goods for the consumer. On the other hand, indifference curve ignores the concept of affordability. It depicts those combinations of the two goods that provide the consumer with the equal satisfaction irrespective of the affordability.

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Similar questions

Q. Given the budget line a consumer will try to opt for _______ level of indifference curve.

Identify which of the following is not true for the Indifference Curves. Give valid reasons for choice of your answer:

a. Lower indifference curve represents lower level of satisfaction.

b. Two regular convex to origin indifference curves can intersect each other.

c. Indifference curve must be convex to origin at the point of tangency with the budget line at the consumer’s equilibrium.

d. Indifference curves are drawn under the ordinal approach to consumer equilibrium.

A consumer has total money income of Rs 250 to be spent on two goods X and Y with prices of Rs 25 and Rs 10 per unit respectively. On the basis of the information given, answer the following questions:

a. Give the equation of the budget line for the consumer.

b. What is the value of slope of the budget line?

c. How many units can the consumer buy if he is to spend all his money income on good X?

d. How does the budget line change if there is a fall in price of good Y?

Q. Match the following:

A.	Various combinations of two commodities that a consumer can purchase	1.	Indifference map
B.	Various combinations of two commodities that give consumer equal satisfaction	2.	Indifference curve
C.	A set of indifference curves	3.	Budget line
D.	Point of agency of a budget line and an indifference curve	4.	Consumer's equilibrium

What is meant by an indifference curve?

Q. What is Indifference Curve? State three properties of indifference curves.

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