Indifference Curves - How Do I Use and Understand Them?

[Q:] I'm taking an economics class and I'm puzzled about indifference curves. How do I draw them, what are they used for, and what do indifference curves tell us?

[A:] Great question! We'll go through indifference curves through the use of an example. The economics glossary has a economic definition of indifference curve, but the full definition isn't necessary for understanding how to use them.

Our example is as follows: You are the production manager for Blades of Steel a small firm which assembles hockey skates from the individual components. You have two part-time employees working under you which you can give as much or as little time to as you wish, up to a total of 8 hours in a day.

Your job as production manager is to determine how many hours you should give to each employee to meet your quota of the number of hockey skates you need made. The two employees are quite different. The first employee, Sammy Sprinter, can assemble a great number of skates during his first hour of work, but his productivity slows down during each additional hour of work. The second employee, Chris Consistent is slower at assembling skates, but her productivity does not decline as she works additional hours.

The productivity during each hour of work is shown at the bottom of the page under the title Indifference Curve Data. With this data we will construct several indifference curves and show how these can be used for analysis. You may find it useful to print out the data so you can use it later.

Next step: Constructing Indifference Curves