Why is the consumer in equilibrium when he buys only that combination of the
two goods that is shown at the point of tangency of the budget line with an
indifference curve? Explain���

because at that point MRSxy=px/py i.e. slope of indifference curve is equal to slope of budget line or u can say that at that pt the consumers income if fully disposed off on the most satisying IC curve for the consumer
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Consumer equilibrium is attained where IC intersects the budget line. He buys the combination where he is getting maximum satisfaction. As we have learnt higher the IC higher is the satisfaction. This is the case if the other combination of goods is on the lower IC.

 

  • 10
when ic curve is tangent to the budget line the consumer attains maximum satisfaction.
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