Plotting Indifference Curves with R Contour Function

March 11, 2011
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(This article was first published on Econometric Sense, and kindly contributed to R-bloggers)

The following post at Constructing Difference Curves – Part 3 from economics.about.com provides a discussion on indifference curves (but actually I think they are isoquants) and how to construct them. I think I have a grasp on how to do this in R if you define the utility function as z =  √(x*y) . For the x and y data I used modified data from the article mentioned above, and then plotted some simulated data.

The data I used for x and y (which I modified-see documentation in the R-code) is listed below:

x: 1,2,3,4,5,6,7,8
y: 10,10,10,15,15,30,60,90

The R code below reads in the data and plots level sets or indifference curves for both the data above and the simulated data. This very basic, for full documentation ( and options for x,y limits, levels etc.) of the contour function in R see here.

Edit: for the second part of the program, if I switch the values of x and y I get indifference curves that are convex to the origin as they should be- the correction can be also represented much more compactly as:

`contour(xyT<-t(as.matrix(cbind(x<-seq(0,20,by=2),y<-seq(0,100,by=10)))),z<-as.matrix(sqrt(x*y)))`

See program below:

`# *------------------------------------------------------------------# | PROGRAM NAME: INDIFFERENCE_CURVES_R# | DATE: 3/11/11# | CREATED BY:  MATT BOGARD# | PROJECT FILE:  P:\R  Code References            # *----------------------------------------------------------------# | PURPOSE: MORE TO PLOT LEVEL SETS USING THE CONTOUR FUNCTION THAN              # |          TO ACTUALLY PLOT INDIFFERENCE CURVES # *------------------------------------------------------------------# | COMMENTS:               # |# |  1: references: http://stat.ethz.ch/R-manual/R-devel/library/graphics/html/contour.html # |  2: # |  3: # |*------------------------------------------------------------------# | DATA USED: http://economics.about.com/od/indifferencecurves/a/constructing3.htm              # |# |# |*------------------------------------------------------------------# | CONTENTS:               # |# |  PART 1: explicit data # |  PART 2: simulated data  (sort of) - not really indifference curves# |  PART 3: # *-----------------------------------------------------------------# | UPDATES:               # |# |# *------------------------------------------------------------------ # *------------------------------------------------------------------# | PART 1:   explicit data            # *-----------------------------------------------------------------   # raw data  x <- c(1,2,3,4,5,6,7,8)y <- c(10,10,10,15,15,30,60,90) # note- for the contour function to work below, x and y # These must be in ascending order-based on the contour documentation#  which is the opposite of how the data was presented at# about.com  # put x and y in a matrix xy <- as.matrix(cbind(x,y)) # transpose xy xyT <- t(xy)  # define function z as a matrix z <- as.matrix(sqrt(x*y)) # plot the countour plot / specified level sets contour(xyT,z) # all levels contour(xyT,z, levels =c(10,20,50)) # specified levels for z # *------------------------------------------------------------------# | PART 2:   simulated data  (sort of) - not really indifference curves            # *-----------------------------------------------------------------  rm(list=ls()) # get rid of any existing data  ls() # display active data -should be null  # define x and y x <- seq(0,100,by=10)y <- seq(0,20,by=2) # put x and y in a matrix xy <- as.matrix(cbind(x,y)) # transpose xy xyT <- t(xy)  # define function z as a matrix z <- as.matrix(sqrt(x*y)) contour(xyT,z)`

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