Question

A consumer consum only two good x and y . State and explain the condition of consumer equilibrium with help of utility analysis.

Answer 1

Answer:

Explanation:

A consumer can attain equilibrium when the marginal utility of money is equal to the marginal utility spend on the last good. Equalisation of satisfactions leads to consumer equilibrium.

Conditions:-

1) As per this equilibrium the budget/price line must be tangential to the indifference curve.

2) As per this equilibrium, the MRS of commodity X&Y must be equal to the price ratio of x n y.

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