Economics - Consumer Equilibrium | 11th Economics : Chapter 2 : Consumption Analysis
Chapter: 11th Economics : Chapter 2 : Consumption Analysis
Consumer Equilibrium
The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve.
Consumer
Equilibrium
The
consumer reaches equilibrium at the point where the budget line is tangent on
the indifference curve.
T is the
point of equilibrium as budget line AB is tangent on indifference curve IC3
the upper IC which implies maximum possible level of satisfaction.
At
equilibrium point, the slope of IC refers to MRSXY and the slope of
BL (Budget Line) refers to ratio of price of X to price of Y ie Px/Py
. Therefore MRSx,y = Px/Py.
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11th Economics : Chapter 2 : Consumption Analysis