Criticism of Indifference Curve Approach

Robertson, Armstrong, Knight etc. have criticised indifference curve analysis on account of the following.

  1. Unrealistic assumption: Indifference curve analysis is based on the assumption that a consumer has complete knowledge regarding the preference of two goods. In reality, he cannot take quick decisions in real life in respect of different combinations.
  2. Complex analysis: Indifference curve analysis can explain easily that behaviour of the consumer which is restricted to the combination of only two goods. If the consumer wants combinations of more than two goods, then indifference curve analysis becomes highly complex.
  3. Imaginary: Indifference curve analysis is based on imaginary combinations. A consumer does not decide always like a computer as to which of the combinations of two goods he would prefer.
  4. Assumption of Convexity: This theory does not explain why an indifference curve is convex to the point of origin. In real life, it is not necessary that all goods should have diminishing marginal rate of substitution.
  5. Unrealistic combinations: When we consider different Combinations of two goods, sometimes we come across such funny combinations that have no meaning for the consumer. For instance, there is a combination of 10 shirts + 2 pairs of shoes. If in the subsequent combinations shirts are given up to get more pairs of shoes then we way arrive at a combination representing 2 shirts + 10 pairs of shoes, which is ridiculous.
  6. Impractical: Indifference curve analysis is based on the unrealistic assumption that goods are homogenous. ‘This assumption holds good only under perfect competition, which is more theoretical concept. In real life, monopolistic and oligopolistic conditions are found more prevalent.

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By Hassham

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