Open AccessIndifference Curve Analysis: The Correct and the Incorrect
Author(s) -
José Antonio Manuel Aguirre Sotelo,
Walter E. Block
Publication year - 2014
Publication title -
oeconomia copernicana
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.59
H-Index - 13
eISSN - 2353-1827
pISSN - 2083-1277
DOI - 10.12775/oec.2014.025
Subject(s) - economics , contrast (vision) , point (geometry) , mathematical economics , econometrics , economic analysis , positive economics , mathematics , computer science , classical economics , geometry , artificial intelligence
The thesis of this paper is that when the indifference curve is concave to the origin, the optimal point on the budget line is not the corner solution on the highest (most north eastern) indifference curve, the analysis all too often offered in the literature, but, rather, somewhat paradoxically, the lowest (most south western) indifference curve. The economics profession, as articulated through the megaphone of intermediate micro economics texts, offers a mixed result in this regard. Some few do offer a correct analysis, but many do not; others ignore the issue entirely. The contribution of the present paper and the aim of our research is to provide a correction of the widespread but erroneous indifference curve analysis that appears in many of our intermediate microeconomics texts. Our methodology is one of contrast: we offer what we see as both the correct and the incorrect versions of indifference curve analysis.