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Indifference Curve Analysis: The Correct And The Incorrect

Author

Listed:
  • José Antonio Manuel Aguirre Sotelo

    (Joseph A. Butt, S.J. College of Business Loyola University New Orleans)

  • Walter E. Block

    (Joseph A. Butt, S.J. College of Business Loyola University New Orleans)

Abstract

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.

Suggested Citation

  • José Antonio Manuel Aguirre Sotelo & Walter E. Block, 2014. "Indifference Curve Analysis: The Correct And The Incorrect," Oeconomia Copernicana, Institute of Economic Research, vol. 5(4), pages 7-43, December.
    • Handle: RePEc:pes:ieroec:v:5:y:2014:i:4:p:7-43
    DOI: 10.12775/OeC.2014.025
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    File URL: http://dx.doi.org/10.12775/OeC.2014.025
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    References listed on IDEAS

    as
    1. David D. Friedman, 1990. "Price Theory: An Intermediate Text," Online economics textbooks, SUNY-Oswego, Department of Economics, number prin13.
    2. William Barnett II & Walter E. Block, 2013. "Subjective preferences and alternative costs," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 6(2), May.
    3. Walter E. Block & José Antonio Manuel Aguirre Sotelo, 2012. "Indifference Curve Analysis: Beyond Simplifying Assumptions," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 12(1), pages 7-12, Fall.
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    Cited by:

    1. Walter Block, 2019. "Rejoinder To Wysocki On Indifference And The Block-Hoppe Debate," Electronic magazine "Dialogue", D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 4 Year 20, pages 1-7.

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    More about this item

    Keywords

    Indifference curve; convex; concave; budget line;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General

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