In case of two commodities, the consumer's equilibrium is given in accordance with the Law of Equi-Marginal Utility.
Law of Equi-Marginal utility states that a consumer allocates his expenditure on various commodities in such a manner that the utility derived from each additional unit of the rupee spent on each of the two commodities is equal. Algebraically, this is represented by the following equality :
Graphically, it can be depicted as follows :
