What are the conditions of consumer stable equilibrium?
A consumer is in equilibrium when given his tastes, and price of the two fig 15 goods, he spends a given money income on the purchase of two goods in such a way as to get the maximum satisfaction, According to Koulsayiannis, “The consumer is in equilibrium when he maximises his utility, given his income and the market …
What is the rule of consumer equilibrium?
The rule of consumer equilibrium is satisfied when a consumer selects a combination of goods that maximizes utility. With utility maximization, a consumer cannot increase utility by consuming more of one good and less of another. This occurs because the marginal utility-price ratio for each good is the same.
What are the two conditions of consumer’s equilibrium under the indifference curve theory?
According to indifference curve approach, consumer’s equilibrium is the point at which the slope of indifference curve is equal to the slope of budget line. Py = Price of Commodity Y, (ii) At the point of equilibrium, indifference curve must be convex to the origin. It means that MRSxy declines when X is consumed more.
What are the conditions of consumer equilibrium under ordinal utility?
The ordinal approach defines two conditions of consumer equilibrium: Necessary or First Order Condition and Supplementary or Second Order Condition.
What are the conditions of consumer equilibrium under ordinal approach?
What are the two conditions of consumer’s equilibrium attained through IC approach?
According to indifference curve approach, a consumer attains equilibrium under two conditions: (i) When marginal rate of substition is equal to ratio of prices of two goods i.e., MRSxy = Px/Py.
What are the conditions of consumer equilibrium Class 11?
There are three conditions for consumer’s equilibrium:
- (1) The Budget line should be Tangent to the Indifference Curve.
- (2) At the point of Equilibrium the Slope of the Indifference Curve and of the Budget Line should be the same.
- (3) Indifference curve should be Convex to the Origin.
What is consumer equilibrium in simple words?
Consumer equilibrium is a point at which a consumer’s derived utility from a commodity is at its maximum, given a fixed level of income and price of that commodity. A rational consumer would not deviate from this point.
What is consumer equilibrium explain with diagram?
A rational consumer will purchase a commodity up to the point where price of the commodity is equal to the marginal utility obtained from the thing. If this condition is not fulfilled the consumer will either purchase more or less.
When is consumer equilibrium in case of two commodity?
1. The consumer will be in the state of equilibrium when the marginal utility of commodity X (in terms of rupees) is equal to the price of commodity X. 2. The marginal utility can never be negative. 3. If MUx/Px > MUy/Py, then the consumer must buy more of commodity Y and less of commodity X to reach equilibrium. 4.
How to find consumer equilibrium formula in microeconomics?
Assume that the utility function is U = q,q 2, and p, = 2 (Rs) and p 2 = 5 (Rs), and the consumer’s income for the period is y = 100 (Rs). Find the commodity combination that would maximise the consumer’s level of satisfaction subject to his budget. Also, find the marginal utility of income at the equilibrium point,
Why is consumer equilibrium equal to 9 utils?
Because these ratios are both equal to 9 utils, the consumer is indifferent between purchasing the second unit of good 1 and first unit of good 2, so she purchases both. She can afford to do so because the second unit of good 1 costs $2 and the first unit of good 2 costs $1, for a total of $3.
When is a rational consumer is at equilibrium?
A rational consumer will be at equilibrium when the marginal utility of a commodity is equal to its price. We know that MU is measured in utils and price is expressed in term of money. Therefore, MU in utils is expressed in term of money. Marginal Utility in money = Marginal Utility in utils/ Marginal Utility of one rupee