What is the condition for consumer equilibrium by indifference curve analysis?

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.

What are the two conditions of consumers equilibrium under the indifference curve theory?

Condition of consumer’s equilibrium : The following two conditions are necessary. (i) Budget line should be tangent to the indifference curve. {i.e., MRS = Ratio of prices of two goods (Px/Py)}. (ii) Indifference curve should be convex to the point of origin O.

What do you understand by consumer’s equilibrium explain conditions of the consumer’s equilibrium?

A consumer is in a state of equilibrium when he maximizes his satisfaction by spending his given income on different goods and services. Any deviation or change in the allocation of income under the given circumstance will lead to a fall in total satisfaction.

What are indifference curves explain the properties of indifference curve establish the conditions of consumer’s equilibrium with the help of indifference curve analysis?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.

What are the conditions of consumer’s equilibrium under IC approach what changes will take place if the conditions are not fulfilled to reach the equilibrium?

All other points lying on the budget line (such as point B and point C) are inferior to (x1*x2*) as they lie on a lower IC (i.e. IC1). Thus, the consumer will rearrange his consumption and will attempt to reach the equilibrium point, where the marginal rate of substitution is equal to the price ratio.

How does it explain consumer’s equilibrium?

Consumer’s Equilibrium means a state of maximum satisfaction. A situation where a consumer spends his given income purchasing one or more commodities so that he gets maximum satisfaction and has no urge to change this level of consumption, given the prices of commodities, is known as the consumer’s equilibrium.

What are the conditions for consumer equilibrium under the Cardinal school of thought?

According to utility analysis, the consumer will be in equilibrium when he is spending money on goods in such a way that the marginal utility of each good is proportional to its price. Let us assume that, in his equilibrium position, consumer is buying q1 quantity of a good X at a price P1.