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Isoquants of the utility function are called indifference curves.

Bundles A, B, and C are on the same indifference curve (U=4), meaning that all three bundles, even though they are different, lead to the same utility.

Since each one gives the consumer the same utility, this means the consumer is indifferent between them. Indifference curves allow us to visualize the 3D function in a 2D graph, the way a topographic map allows us to visualize terrain elevation.

Properties of indifference curves

1. Indifference curves have a negative slope (typically).
2. Indifference curves cannot intersect, so they have to be parallel.
3. Every consumption basket lies on one and only one indifference curve.
4. Indifference curves are often convex, that is, bent inwards – which means that consumers prefer averages to extremes.
5. Remember: An indifference curve simply gives you a bird’s-eye view of the consumer’s “ascent” up the utility mountain.

Marginal rate of substitution

The marginal rate of substitution(MRS) describes the consumer’s willingness to substitute one good for another while maintaining the same level of satisfaction. More precisely, the marginal rate of substitution of x for y MRSx,y= how many units of y you are willing to give up for one unit of x. Think of it as a trade-off between the two goods, so more of good x means giving up some amount of good y, so your overall wellbeing (utility) remains unchanged.

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