Question

illustrate the process of consumer equilibrium using Indifference Curve approach of consumer equilibrium also discuss its limitations?​

Answer 1

Answer:

Consumer 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 infldifference curve or marginal rate of substitution of good X for good Y (MRSxy) must be equal to the price ratio.i.e. MRSxy = Px/Py

2. The indifference curve should be convex to the origin at the point of tangency.