Question

give the condition of consumer's equilibrium?​

Answer 1

Explanation:

Hope it will help you..

Answer 2

Answer:

Equilibrium is the state where consumer is fully satisfied and there is no need to make change in his consumption .

According to cardinal approach, it is necessary that the marginal utility of X good is equal to the market price of X good.

•MUx = Px

If the marginal utility of X good is more than the price of X good,then the consumer will buy more quantity of X good . On other hand if the price of X good is more than the marginal utility of X good then he will decrease the consumption of X good.

If a consumer consumes more than one good then to being in a equilibrium state ,he has to fulfill the below condition-

• MUx/Px = MUy/Py = .....MUn/Pn

If the marginal utility and price of X good both is more ,then the consumer will spend more on X good but if the marginal utility and price of Y good both is more then he will spend his income more on that good . In simple words we can say that to increase his satisfaction he will spend more on such good which maximizes his welfare and decrease his expenditure on other goods till the above condition is fulfilled.

Beside above condition the income condition is also necessary to be fulfilled -

• X.Px + Y.Py + ..... = M

( here, M = income of the consumer )

It means the expenditure on X good i.e X.P and expenditure on Y good i.e Y.P should be equal to the consumer's income.