In
international trade theory the concept of
community indiffernce curves (CIC)is very interesting. A CIC represents the different bundles of two goods (let's say food and clothing) that produce the same amount of
utility for a community. For CICs to exist, individual preferences must be identical and homothetic. Preferences are homothetic when individuals consume the same
ratio of clothing to food no matter what their
level of income is. Therefore someone making $100,000 would spend the same percentage of their income on food as someone who made $20,000. Of course
economists realize this does not hold true for real-life, but economic models rarely do.