Question

Explain the derivation of consumer’s equilibrium through budget

line and indifference curve.​

Answer 1

Answer:

A consumer is said to have attained equilibrium when he spends given income or budget in such a way as to yield optimum satisfaction, given the prices of two goods and the consumer's preference. In simple words, a consumer is said to be in equilibrium when he is getting maximum satisfaction out of his limited income.

A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint. An indifference curve shows combinations of two goods that yield equal satisfaction. To maximize utility, a consumer chooses a combination of two goods at which an indifference curve is tangent to the budget line.

Answer 2

Answer:

Consumer equilibriumrefers to a situation, inwhich a consumer derives maximum satisfaction, withno intention to change it and subject to given prices and his given income. ... So, a consumer always tries to remain at the highest possibleindifference curve, subject to his budget constraint.