Question

I want case study related to consumers equilibrium project

Answer 1

"The term consumer’s equilibriumrefers to the amountof goods and services which the consumer may buy in themarket given his income and given prices of goods in themarket".The aim of the consumer is to get maximum satisfactionfrom his money income. Given the price line or budgetlineand the indifference map"A consumer is said to be in equilibriumat a pointwhere the price line is touching the highest attainableindifference curve from below".CONDITIONS:Thus the consumer’s equilibrium under the indifferencecurve theory must meet the following two conditions:First:A given price line should be tangent to anindifference curve or marginal rate of satisfaction ofgood X for good Y (MRSxy) must be equal to the priceratio of the two goods. i.e.MRSxy= Px/ Py

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Second:The second order condition is that indifferencecurve must be convex to the origin at the point oftangency.ASSUMPTIONS:The following assumptions are made to determine theconsumer’s equilibrium position.(i) Rationality:The consumer is rational. He wants to obtainmaximum satisfaction given his income and prices.(ii) Utility is ordinal:It is assumed that the consumer canrank his preference according to the satisfaction of eachcombination of goods.(iii) Consistency of choice:It is also assumed that theconsumer is consistent in the choice of goods.(iv) Perfect competition: There is perfect competition in themarket from where the consumer is purchasing the goods.(v) Total utility:The total utility of the consumer depends onthe quantities of the good consumed.