Question

how can you derive consumer's equilibrium in case of two goods with cardinal utility approach
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Answer 1

Answer:

Suppose, a consumer consumes only two goods X and Y.

He will attain equilibrium only if he allocates his given income on the purchase of good X and Y in such a way that per rupee MU of both the products is equal and he gets maximum TU.

Any change in this combination will reduce his total satisfaction.

The ordinal approach defines two conditions of consumer equilibrium: Necessary or First Order Condition and Supplementary or Second Order Condition.

Answer 2

Answer:

He will attain equilibrium only if he allocates his given income on the purchase of good X and Y in such a way that per rupee MU of both the products is equal and he gets maximum TU.

Any change in this combination will reduce his total satisfaction.