Question

what are the conditions of consumer's equilibrium under the indifference curve approach? What changes will take place if the conditions are not fulfilled to reach equilibrium?​

Answer 1

Answer:

All other points lying on the budget line (such as point B and point C) are inferior to (x1*x2*) as they lie on a lower IC (i.e. IC1). Thus, the consumer will rearrange his consumption and will attempt to reach the equilibrium point, where the marginal rate of substitution is equal to the price ratio