## Indifference Curve Analysis: An Alternative Approach to Understanding Consumer Choice

Read this section to learn about indifference analysis. Attempt the "Try It” problems at the end of the section before checking your answers.

### 7. Key Takeaways

• A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint.
• An indifference curve shows combinations of two goods that yield equal satisfaction.
• To maximize utility, a consumer chooses a combination of two goods at which an indifference curve is tangent to the budget line.
• At the utility-maximizing solution, the consumer's marginal rate of substitution (the absolute value of the slope of the indifference curve) is equal to the price ratio of the two goods.
• We can derive a demand curve from an indifference map by observing the quantity of the good consumed at different prices.
{"extraction_info": {"found_math": false, "script_math_tex": 0, "script_math_asciimath": 0, "math_annotations": 0, "math_alttext": 0, "mathml": 0, "mathjax_tag": 0, "mathjax_inline_tex": 0, "mathjax_display_tex": 0, "mathjax_asciimath": 0, "img_math": 0, "codecogs_latex": 0, "wp_latex": 0, "mimetex.cgi": 0, "/images/math/codecogs": 0, "mathtex.cgi": 0, "katex": 0, "math-container": 0, "wp-katex-eq": 0, "align": 0, "equation": 0, "x-ck12": 0, "texerror": 0, "math_score": 0.9171926379203796, "perplexity": 1156.5598014465515}, "config": {"markdown_headings": true, "markdown_code": true, "boilerplate_config": {"ratio_threshold": 0.18, "absolute_threshold": 10, "end_threshold": 5, "enable": true}, "remove_buttons": true, "remove_image_figures": true, "remove_link_clusters": true, "table_config": {"min_rows": 2, "min_cols": 3, "format": "plain"}, "remove_chinese": true, "remove_edit_buttons": true, "extract_latex": true}, "warc_path": "s3://commoncrawl/crawl-data/CC-MAIN-2021-49/segments/1637964363290.59/warc/CC-MAIN-20211206072825-20211206102825-00505.warc.gz"}