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in Consumers Equilibrium by (63.7k points)

What is meant by consumer’s equilibrium? State the conditions required for equilibrium.

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Consumer’s equilibrium refers to a situation in which the consumers get maximum satisfaction from their income and there is no tendency to make any change in their current expenditure. In other words, a consumer is in equilibrium when he considers his actual behaviour to be the best possible in the circumstances and there is no need to change his behaviour till circumstances remain unchanged.

The following two conditions are required for the consumer to be in equilibrium:
(i) A given budget line must be tangent to an indifference curve, or marginal rate of
substitution of X for Y (MRSxy) must be equal to the price ratio of the two goods Px/Py.
(ii) Indifference curve must be convex to the origin at the point of tangency.

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