Explain the condition for consumers equilibrium with the help of margi

1.	Explain the condition for consumers equilibrium with the help of marginal utility analysis
Answer» HEY there! -------- Consumer's equilibrium - Consumer's equilibrium may be defined as a situation under which a consumer gets maximum level of satisfaction within his given money income and given market prices of commodities. Marginal utility - Marginal utility is an addition MADE to total utility by consuming an additional UNIT of a commodity. ________________________________ Answer -: The conditions for consumer's equilibrium given by the marginal utility analysis are : (i) One commodity case (ii) Two commodity case A consumer is said to be in equilibrium, when he is spending his given income on various goods in such a way that maximises his satisfaction. → Condition of consumer's equilibrium in case of a SINGLE commodity : Consumer's equilibrium in case of a single commodity is attained when the marginal utility of the commodity measured in terms of money is equal to its price. Symbolically, $MU_{x}=P_{x}$ → Condition of consumer's equilibrium in case of a two commodity : Consumers's equilibrium in case of two commodities is attained when the ratio of the marginal utilities of two goods and their prices is equal, i.e., $\frac{MU_{x}}{P_{x}} = \frac{MU_{y}}{P_{y}}$ This is, however, subject to the budget CONSTRAINTS that the money spent just equals income, i.e., $P_{x} × Q_{x} + P_{y} × Q_{y} = M$

Explain the condition for consumers equilibrium with the help of marginal utility analysis

Answer»

HEY there!

--------

Consumer's equilibrium - Consumer's equilibrium may be defined as a situation under which a consumer gets maximum level of satisfaction within his given money income and given market prices of commodities.

Marginal utility - Marginal utility is an addition MADE to total utility by consuming an additional UNIT of a commodity.

________________________________

Answer -:

The conditions for consumer's equilibrium given by the marginal utility analysis are :

(i) One commodity case

(ii) Two commodity case

A consumer is said to be in equilibrium, when he is spending his given income on various goods in such a way that maximises his satisfaction.

→ Condition of consumer's equilibrium in case of a SINGLE commodity : Consumer's equilibrium in case of a single commodity is attained when the marginal utility of the commodity measured in terms of money is equal to its price. Symbolically, $MU_{x}=P_{x}$

→ Condition of consumer's equilibrium in case of a two commodity : Consumers's equilibrium in case of two commodities is attained when the ratio of the marginal utilities of two goods and their prices is equal, i.e., $\frac{MU_{x}}{P_{x}} = \frac{MU_{y}}{P_{y}}$

This is, however, subject to the budget CONSTRAINTS that the money spent just equals income, i.e.,

$P_{x} × Q_{x} + P_{y} × Q_{y} = M$

Explain the condition for consumers equilibrium with the help of marginal utility analysis

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