Briefly explain the concept of consumer’s equilibrium?

1.	Briefly explain the concept of consumer’s equilibrium?
Answer» 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 MRS_xy and the slope of BL (Budget Line) refers to ratio of price of X to price of Y i.e. P_x / P_y . Therefore MRS_x,y = P_x / P_y.

Answer»

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 MRS_xy and the slope of BL (Budget Line) refers to ratio of price of X to price of Y i.e. P_x / P_y . Therefore MRS_x,y = P_x / P_y.

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Briefly explain the concept of consumer’s equilibrium?

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