Question

What is consumer equibrilium. ​

Answer 1

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Consumer Equilibrium:

The state of balance obtained by an end-user of products that refers to the number of goods and services they can buy given their existing level of income and the prevailing level of cost prices.

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Answer 2

Explanation:

Consumers Equilibrium

In order to display the combination of two goods X and Y, that the consumer buys to be in equilibrium, let’s bring his indifference curves and budget line together.

We know that,

Indifference Map – shows the consumer’s preference scale between various combinations of two goods

Budget Line – depicts various combinations that he can afford to buy with his money income and prices of both the goods.

In the following figure, we depict an indifference map with 5 indifference curves – IC1, IC2, IC3, IC4, and IC5 along with the budget line PL for good X and good Y.

consumers equilibrium

From the figure, we can see that the combinations R, S, Q, T, and H cost the same to the consumer. In order to maximize his level of satisfaction, the consumer will try to reach the highest indifference curve. Since we have assumed a budget constraint, he will be forced to remain on the budget line.