Why Are Indifference Curves Downward Sloping
Why are indifference curves in economics slope downward?
Indifference curves are downward in slope. An indifference curve measures the value a consumer receives from the consumption of two different products. If the level of satisfaction is high for the consumption of one good, it will be lower for the consumption of the second good. Thus, the curve must be downward sloping. This curve shows the overall level of satisfaction for the consumption of two products. Anywhere along the curve, the consumer is indifferent to the amount of each product consumed.
Since the indifference curve measures the satisfaction a person gets from consuming these products, the more one product is consumed indicates a lower preference for the other product. This is known as the marginal rate of substitution. Generally, the more one good is consumed, the satisfaction from consuming more of that good will decrease. The first ice cream sundae a person eats will bring a lot of satisfaction to that person. However, by the time that person is eating the fourth ice cream sundae, the level of satisfaction will drop. Thus, the marginal rate of substitution is negative.
An indifference curve is a graph which shows the combination of two goods that provide the consumer equal utility and satisfaction. Each point on the curve serves as an indicator that the consumer is indifferent between those two goods and that he is given the same utility.
The indifference curve is drawn as a downward slope from left to right; in other words, it is negatively sloped. This is because as the consumer increases the consumption of a particular commodity (X), he or she must sacrifice units of the other commodity (Y) to maintain the same level of satisfaction.
The higher the curve lies, the higher the level of satisfaction; the lower the curve, the lower the level of satisfaction. Thus, the higher on the indifference curve a combination of goods lies, the more it is preferred by a consumer; the lower on the curve the combination lies, the less it is preferred by a consumer.
An indifference curve is a line that shows all the "consumption bundles" that yield (and here's the important part) the same amount of total utility for an individual.
So what an indifference curve does is shows what combinations of two goods or services you can consume without changing the amount of utility that you gain from the consumption.
In order to consume more of one of the goods without getting more total utility, you have to give up some of the other good. Because of this, the curve has to slope downwards.
Samuelson and Nordhaus define indifference curve as:
A curve drawn on a graph whose two axes measure amounts of different goods consumed. Each point on such a curve, indicating different combinations of the two goods, yields exactly the same level of satisfaction to a given consumer.
It is quite true that law of diminishing marginal utility ensures that indifference curves are downward sloping. Further it also ensures that the indifference curves are convex to the origin. But downward sloping curve is possible also when the marginal utility is constant rather than diminishing with the total quantity consumed.
To ensure a downward sloping curve it is enough that reduction in quantity of one of the two goods represented on indifference curve must be accompanied by some increase in the quantity of the other good represented. Similarly increase in quantity of first good mus be accompanied by decrease in quantity of the other good. It is not possible for quantity for both the goods to increase or decrease simultaneously and still have the same combined utility of the two. If it was possible for combined utility of two goods to behave in this way than the indifference curve would have been an upward sloping curve.
When marginal utility of both the goods on indifference curves is constant then the indifference curve is a downward sloping straight line. When one of the two good has constant marginal utility and the other has diminishing marginal utility the indifference vurve is a curved line concave to the origin. When both the goods have diminishing marginal utility, the indifference curve is a curved line convex to the origin.
Samuelson P.A. and Nordhaus W.D., Economics, Eighteenth Edition, 2005, Tata McGraw-Hill, New Delhi