Why is a consumer in equilibrium only at point of tangency of the budget line with an indifference curve?

The consumer will not like to purchase any other bundle on the budget line AB. For example the bundle of C and D because they all lie on the lower indifference curve and give him lower satisfaction. Therefore the equilibrium choice is only of the tangency point E.

Why is the tangency of the indifference curve and the budget constraint equilibrium?

Indifference curves are steeper on the far left and flatter on the far right, because of diminishing marginal utility. The utility-maximizing choice along a budget constraint will be the point of tangency where the budget constraint touches an indifference curve at a single point.

What point is the point of tangency between price line and indifference curve?

A consumer attains equilibrium position at the point of tangency of price line and IC because at that point it can achieve maximum utility and he can not go beyond it because income is constant.

What is meant by consumer equilibrium explain the equilibrium of consumer with indifference curve and budget line?

Consumer equilibrium refers to a situation, in which a consumer derives maximum satisfaction, with no intention to change it and subject to given prices and his given income. So, a consumer always tries to remain at the highest possible indifference curve, subject to his budget constraint.

Is in equilibrium at a point where the budget line?

The consumer is in equilibrium at a point where the budget line is tangent to an indifference curve. It means that marginal substitution rate between X and Y (MRSXY) should be diminishing.

How does consumer attendance equilibrium through indifference curve?

Understanding Consumer’s Equilibrium by Indifference Curve Analysis! On an indifference map, higher indifference curve represents a higher level of satisfaction than any lower indifference curve. So, a consumer always tries to remain at the highest possible indifference curve, subject to his budget constraint.

What is consumer equilibrium explain with the difference curve and budget constraint how a consumer attains equilibrium?

Consumer equilibrium refers to a situation, in which a consumer derives maximum satisfaction, with no intention to change it and subject to given prices and his given income. The point of maximum satisfaction is achieved by studying indifference map and budget line together.

Why should consumers equilibrium point be located on the budget line?

Only a point that lies on the budget line can be the equilibrium point because of the fact that only the combination of goods as represented by these points is affordable by the consumer given his income. This suggests that the consumer can have more of at least one of the goods and no less of the other.

How does the budget line and consumer equilibrium on the indifference map moves if the consumer’s income changes?

3.12, when a consumer’s income increases, his budget line shifts parallel and upward and when his income decreases the budget line shifts downward. As the income changes, a new equilibrium is established and the consumer moves from one equilibrium point to another.

What is the consumer equilibrium point?

Consumer equilibrium is a point at which a consumer’s derived utility from a commodity is at its maximum, given a fixed level of income and price of that commodity. A rational consumer would not deviate from this point.

What do you understand by consumer equilibrium show consumer’s equilibrium with the help of indifference curve analysis?