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Explain consumer equilibrium with help of indifference curve analysis .How would a consumer react when slope of IC >slope of budgetline

Posted by Prerna Shivach 6 years, 8 months ago

CBSE > Class 12 > Economics

4 answers

Rajat Katkani 6 years, 8 months ago

When the slope of IC curve is greater than slope of budget line then it shows that the consumers desire to consume X commodity is more than that of Y commodity which means that he will go on substituting the commodity y and gain more of X at a decreasing rate and ultimately will reach a point where MRSxy will be equal toPx/Py

2Thank You

Rajat Katkani 6 years, 8 months ago

According to the indifference curve analysis the consumer attains equilibrium when the following three conditions are satisfied :- 1. The slope of indifference curve is equal to slope of budget Line or the budget line is tangent to the indifference curve symbolically, MRSxy=Px/Py 2. Income =Expenditure --> the consumer must consume or spend his entire income 3. Law of diminishing marginal rate of substitution

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N P 6 years, 8 months ago

Also draw the indifference map diagram and explain briefly

0Thank You

N P 6 years, 8 months ago

Consumer equilibrium is attainre when the marginal utility (mu) of commodity in money terms= price of commodity. Conditions for consumer equilibrium in IC are; 1) MRSxy=Px/Py 2) Diminishing MRS *Explain MRSxy > Px/Py and MRSxy < Px/Py*

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