Assumptions of indifference curve analysis:
(i) More Quantity of Goods is Better Than the Less : It is believed that the consumer will always like a greater amount of quality goods, provided the other things remain unchanged in their disposal.
(ii) Preferences or Indifferences of a Consumer are Transitive: Suppose, there are three combinations of two goods A, B and C. If the consumer is indifferent between A and B and C, it is then assumed that he will be indifferent between A and C too. This condition implies that consumer’s tastes are quite consistent. This assumption is known as Assumption of Transitivity.
(iii) Utility is Ordinal: It is truly believed that consumers can evaluate different combinations of the objects according to their liking.
(iv) Diminishing Marginal Rate of Substitution : This principle is related to the logic that the particular desires are saturated and various goods are not the right choice for each other.
