From the perspective of indifference approach, the size of utility differences can be established.TrueFalse

Understanding the Indifference Approach

The indifference approach in economics relates to how individuals derive satisfaction or utility from different combinations of goods or services. An important aspect of this approach is that it allows us to understand consumer preferences without measuring the absolute levels of utility.

Analysis of the Statement

1. Utility Differences: The statement claims that the size of utility differences can be established. However, in the indifference approach, what is primarily focused on is the ranking of preferences rather than the quantification of utility differences.

2. Indifference Curves: These curves represent combinations of goods that provide the same level of utility to a consumer. While we can say a consumer is indifferent between two goods on the same curve, this does not allow us to quantify how much more utility one good provides over another quantitatively.

3. Conclusion: Since the indifference approach centers on the idea of preference ranking without establishing precise utility differences, the statement is False.

Final Answer

False. The indifference approach does not allow for the establishment of the size of utility differences; it only addresses preferences without quantifying them.