Consumer's Equilibrium and its' two approaches

 1)








Consumer's Equilibrium refers to a situation when a consumer gets maximum satisfaction by spending his income across different goods and services.

Assumptions on Consumer's Equilibrium:

i) Consumer behaves rationally, and aims at the maximisation of his satisfaction.

ii) Utility can be expressed in cardinal numbers, like 1, 2, 3...

iii) Utility of a commodity is not affected by by the consumption of other goods i.e., Utility is independent for a particular good.

iv) Marginal Utility of money remains constant.

Consumer's Equilibrium has two approaches:

1) Utility Approach (cardinal)

- under utility approach we have

a) Single commodity

b) Two commodity


2) Indifference curve approach (ordinal)

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