Question

What is Consumer's Equilibrium?​

Answer 1

□ QUESTION

What is Consumer's Equilibrium?

□ ANSWER

The state at which a consumer derives maximum utility from the consumption of one or more goods and services given his/her level of income is called consumer's equilibrium. At that level of balance between total utility and income, the marginal utility of a product is equal to its one unit price.

Answer 2

Answer:

In simple terms consumer's equilibrium is

The consumer is said to be in equilibrium when he is able to get maximum satisfaction. There are two conditions that must be satisfied for the consumer to be in equilibrium. These are 1. At the point of equilibrium, the budget / price line must be tangent to the indifference curve at its minimum point. 2. At the point of equilibrium, the consumer's MRS xy and the price ratio must be equal i.e. MRS xy = Px / Py .