Useful Notes on L-Shaped and Straight Line Indifference Curve in Consumer Behavior

When the commodities under consideration are complements to each other or substitutes, indifference curves do not take normal shapes.

For complementary commodities, indifference curves look like the English letter ‘L’, whereas for substitutes indifference curves are negatively sloped straight lines.

1. L-Shaped Indifference Curve:

Let us take two complementary products – tea and sugar cubes. Suppose, 1 spoonful of tea and 2 sugar cubes are required for making one cup of tea. This combination [point B in panel (a) of figure 7.10] yields certain level of satisfaction (represented by IC,).

If the consumer is given 4 sugar cubes instead of 2, i.e., 1 spoonful of tea along with 4 sugar cubes, the new combination (denoted by point C) will be unable to create any extra satisfaction since two additional sugar cubes will remain unused unless one additional spoon of tea is given to the consumer.

Similarly, two sugar cubes with 2 spoonful of tea (represented by point A) will be also yield the same utility, because for using 2 spoonful of tea, 4 sugar cubes are requires. So points A, B and C will lie on the same indifference curve as all these points represent the utility level which can be derived from the combination of 1 spoonful of tea and 2 sugar cubes. So the line joining these three points is an indifference curve which looks like ‘L’.

To increase utility, complementary commodities must be increased in the same proportion (here the ratio is 1:2). For example, 2 spoonful of tea with 4 sugar cubes [point D in panel (a)] will yield more utility than the combinations represented by points A, B or C and hence lie on a higher indifference curve (say IC₂).

2. Straight Line Indifference Curve:

Let us take two brands of cold drinks – Pepso and Koku Cola. Suppose a person consumes both Pepso and Koku cola, and preference for a particular brand is ignored. Now if 2 bottles of Pepso are withdrawn from his consumption basket and 2 extra bottles of Koku Cola are given to him, his level of utility will remain unchanged and hence both the points representing these two bundles lie on the same indifference curve.

A movement from point R to point S [panel (b) of figure 7.10] is a diagrammatic representation of this possibility and implies that for a consumer two bottles of Pepso is substituted by two bottles of Koku Cola and yet his level for utility remains unchanged.

If the same exercise is repeated, we observe a movement from point S to T where the same quantity of Pepso is substituted by the same quantity of Koku Cola, maintaining the same level of satisfaction. Thus, all these three points R, S and T will lie on the same indifference curve providing a linear shape of it.