Visualizing

As usual, we can make these ideas more general and applicable if we visualize them with a diagram. One of the best ways to visualize a consumer's preferences is with an "indifference curve" diagram.

Figure 1 is an Indifference Curve Diagram for wings and fries, partly based on the previous numerical example. The number of wings the person consumes is on the horizontal axis, and the number of fries is on the vertical axis. Thus, each point in the diagram corresponds to a particular number of wings and fries. For example, point A -- with the asterisk -- corresponds to 2 wings and 30 fries.

Figure 1: Indifference Curves for Wings and Fries

An indifference curve is a curve connecting points in the diagram in such a way that the consumer is indifferent between any two combinations shown by points on the curve. For example, consider the curve labeled II. It connects -- among others -- 30 fries and no wings, 15 fries and 1 wing, and 0 fries and 3 wings. We have already seen that these alternatives are tied for 6th place in the preferences, as shown in Table 2. Let's assume that all the other points on curve II also correspond with combinations of fries and wings (some in fractional amounts) that would all be tied with these three. Then Curve II is an indifference curve for this consumer. But it is not the only one, and in fact there are infinitely many indifference curve corresponding to any consumer's preferences.

We can always draw an indifference curve through the point in the diagram. Fractional quantities are OK. Remember, we may get fractional quantities when we average the person's behavior over time -- so this is an advantage. We don't have to limit ourselves to whole numbers as we do in the numerical examples. If we choose two points, corresponding to two different combinations of wings and fries (or any other goods or services) either they will be on the same indifference curve or on two different indifference curves. If the same, then the person is indifferent between the two choices. If they are on different indifference curves, then one curve will be completely above the other, and that means the person prefers the combination on the higher curve.

Spending