Question

Explain consumer equilibrium by indifference curve analysis. What if a consumer is not in

equilibrium and what he should do to be in equilibrium?​

Answer 1

Answer:

Consumers equilibrium is the amount of goods the consumer can buy in the market given his/her current level of income.

There are two conditions for consumers equilibrium:

1) The first is that the budget line should tangent to the indifference curve or marginal rate of substitution of good X for Good Y (MRS

xy

) must be equal to the price ratio . i.e MRS

x

y = P

x

/P

y

2) The indifference curve should be convex to the origin at the point of tangency