Consumer’s equilibrium will be at the point where he gets maximum satisfaction with the given money income. As such, a consumer will attempt to reach the highest indifference curve which is within his purchasing power shown by budget line. Hence, a consumer will be at equilibrium at the point when following two

1. MRS = Ratio of prices – Let the two goods be X and Y. The first condition for consumer’s equilibrium is that MRS – Px/Pv. Now suppose MRS is greater than Px/Py. It means that the consumer is willing to pay more for X than the price prevailing in the market. As a result, the consumer buys more of X. This leads to fall in MRS. MRS continues to fall till it becomes equal to the ratio of prices and the equilibrium is established. 

2. MRS continuously falls – Unless MRS continuously falls, die equilibrium cannot be established. Adjacent diagram shows the equilibrium of a consumer. A consumer will be at equilibrium at E because he gets maximum satisfaction from his given money income. He will not like to shift to any point left to E because the level of satisfaction is lower. He will like to move to right of E but his money income is not sufficient to achieve it.