uses of indifference curve analysisindifference

Question

Uses of Indifference Curve Analysis

Indifference curve analysis is useful when studying welfare economics as follows:

1. They are used to indicate the amount of income and leisure combination that can yield a given level of satisfaction allowing for the measure of trade off between leisure and income.
2. Since each indifference curve represents a given level of welfare, in an indifference map, the curve to the right represents a higher level of welfare. This is useful in analysing the effect taxation on the standard of living in an economy. A tax level may reduce the economic standard of the people and vice versa.
3. Employees use indifference curve analysis to decide whether to give employees housing facility in kind or in money allowance in a manner not to affect their welfare.