INDIFFERENCE CURVE VS ISOQUANT: SIMILARITIES AND DIFFERENCES

Indifference curve and isoquants are two sides of the same coin.

An indifference curve is a curve that shows the combination of two goods that will provide the same level of satisfaction to a consumer

It shows the combination of two goods to which a consumer is indifferent.

An isoquant, on the other hand, shows the combination of inputs that will give the producer the same level of output.

It shows the various combination of two inputs that will result in the same level outputs.

There are some similarities between indifference curves and isoquant, but there are also some clear differences. Let's take a look at each one separately.

Similarities between indifference curves and isoquant curves

1. Both are convex to the origin: Indifference curves and isoquants are both convex to the origin due to the laws of diminishing marginal rate of substitution and diminishing marginal rate of technical substitution, respectively.

2. Higher is preferred for both: An higher indifference curve is preferred to a lower indifference curve because the former represents a higher level of utility.

Similarly, a higher isoquant is preferred to a lower isoquant because the former represents a higher level of output.

3. They're both negative sloped: Indifference curves and isoquants are both negatively sloped.

A negatively sloped indifference curve indicates that the consumer will require less of one good and more of another to maintain the same level of satisfaction

In the same vein, a negatively sloped isoquant sloped indicates that the producer will require less of one input and more of another to maintain the same level of output.

4. Both assumes two variables: The indifference curve and isoquant assumes that there are two goods and two inputs respectively.

5. Both have an L-shaped curve for perfect complements: Perfect complementary goods are represented as an L-shaped indifference curve in the same way Perfect complementary inputs are represented as L-shaped isoquants.

6. Both have straight lines for perfect substitutes: Perfect substitute goods are represented as straight-line indifference curves in the same way Perfect substitute inputs are represented as straight line isoquants.

7. Both can't intersect: No two indifference curves can cross each other, and no two isoquants can cross each other.

8. Both use tables: An indifference curve's information can be represented on a table, which is referred to as an indifference schedule.

The information on an isoquant curve can also be expressed on a table, which is referred to as the isoquant schedule

Differences Between Indifference Curves And Isoquants.

1. Isoquant relates to the producer whereas the Indifference curve relates to the consumer

In essence, an indifference curve is the consumer equivalent of a producer Isoquant curve. An isoquant curve is the producer equivalent of a consumer indifference curve.

2. The slope of the isoquant is called the marginal rate of technical substitution whereas the slope of the indifference curve is called the marginal rate of substitution.

3. Isoquants reflects production functions while indifference curves reflect utility functions

4. While isoquant shows the combination of inputs that will produce the same level of output, the indifference curve shows the combination of two goods that will give the same level of satisfaction

5. A group of isoquant curves is called an isoquant map whereas a group of indifference curves are called an indifference map.

6. An indifference curve represents satisfaction, which cannot be expressed in physical units.

In contrast, the isoquant curve represents the outputs, which can be expressed in physical units.

This distinction is essential when comparing different indifferent curves/isoquants. We only know that a higher indifference curve provides more satisfaction than a lesser indifference curve, but, we can't say how much or less satisfaction is gained from an indifference curve as compared to another. In contrast, one can easily tell by how much more or less a higher isoquant is greater than a lower isoquant through output produced.

7. Along with the budget lines, indifference curves are used to determine consumer equilibrium.

By contrast, along with isocost lines, the isoquant curve is used to determine the producer equilibrium or the output with the lowest cost.

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8.  Indifference curve depicts consumer behaviour in consumption whereas an isoquant curve depicts firms in production.

9. The degree of substitutability between two goods is represented by the indifference curve, whereas the degree of substitutability between two inputs is represented by the isoquant curve.

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