Explain consumers equilibrium with indifference curve approach with diagram in case of two commodity
Dear Student,
"A consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve from below.
The conditions for Consumer equilibrium are:
1) MRSxy = Px / Py
2) indifference curve must be convex to the origin at the point of tangency.
3) for the stable consumer equilibrium is that the indifference curve must be convex to the origin at the point of equilibrium. or the MRS of X for Y must be diminishing at the point of equilibrium.
Regards
"A consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve from below.
The conditions for Consumer equilibrium are:
1) MRSxy = Px / Py
2) indifference curve must be convex to the origin at the point of tangency.
3) for the stable consumer equilibrium is that the indifference curve must be convex to the origin at the point of equilibrium. or the MRS of X for Y must be diminishing at the point of equilibrium.
Regards