Question

explain how equilibrium achieved through IC approach 6 marks​

Answer 1

Explanation:

While there are higher curves, IC4 and IC5, they are beyond his budget. ... Therefore, we can say that consumers equilibrium is achieved when the price line is tangential to the indifference curve. Or, when the marginal rate of substitution of the goods X and Y is equal to the ratio between the prices of the two goods. ·

Answer 2

Answer:

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Explanation:

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.