Indifference Curve Indifference Curve is defined as the locus of points of combinations of two goods, good 1 and good 2, which gives the consumer the same level of satisfaction. It is the graph showing the bundles that give the consumer the same level of satisfaction. This is shown in below given diagram.
Points on, above and below the indifference curve
In the above given Diagram, A and B are two points on the indifference curve. The consumption bundles (X1, Y2) and (X2, Y1) give him the same level of satisfaction. The bundles A and B are known as efficient bundles. Any bundle outside the indifference curve, e.g., the bundle at point D is the preferred bundle. But any bundle below the indifference curve is an inferior bundle. For example, C is an inferior bundle.
