4 Assumptions To Explain The Equilibrium Of The Consumer With Curve

4 Assumptions To Explain The Equilibrium Of The Consumer With Curve A consumer is said to be in equilibrium when he is buying such a combination of goods as leaves him with no tendency to rearrange his purchases of goods. he is then in a position of balance in regard to the allocation of his money expenditure among various goods. in the indifference curve technique the consumer's equilibrium is discussed in respect of the purchases of two goods by the consumer. There are three conditions for consumer’s equilibrium: (1) the budget line should be tangent to the indifference curve. given these assumptions, the consumer can buy 5 units of x by spending the entire sum of rs. 10 on good x or on 10 units of y. table 15.4 illustrates some of the possible combinations on which rs. 10 can be allocated.

4 Assumptions To Explain The Equilibrium Of The Consumer With Curve At the point of equilibrium, slope of the budget line = slope of the indifference curve. indifference curve should be convex to the point of origin. 1. budget line should be tangent to the indifference curve. consumer’s equilibrium is based on the assumption that the income of a consumer is constant and that he spends his entire income on. However, p = mu is a necessary but not a sufficient condition for a consumer’s equilibrium. in fig. 4, we find that the mu curve is intersecting the price curve pp at two differ­ent points m and n. so far m is concerned, although by having oa quantity the consumer is reaching the point where p – mu but it is not equilibrium. Consumer equilibrium is a very popular economics concept. this is because it helps to explain how consumers maximize their utility by consuming one or more commodities. moreover, it also assists consumers in ranking the combination of two or more commodities on the basis of their taste and preference. table of contents. 1. marginal utility of the last rupee spent on each good is the same. 2. marginal utility of a commodity falls as more of it is consumed. let us understand the consumer’s equilibrium in the case of two commodities with an example. suppose a consumer has to spend ₹. 24 on two commodities i.e. x and y.