# Explain the concept of consumer equibilirium with indifference curve

1
by fkkiller

2016-04-04T21:12:52+05:30
Q What do you mean by consumer equilibrium?
A Consumer equilibrium is a situation in which a person gets maximum satisfaction.

Q What do you mean by utility?
A Want satisfying power of any commodity is known as consumer equilibrium.

Q What is Total Utility?
A It is the sum total of utility derived from the consumption of all units of a commodity.

Q What is Marginal Utility?
A it refers to additional utility on account of the consumption of an unit of a commodity.

Q What is Budget line?
A It refers to attainable combinations of sets of two commodity at given prices of commodity and income of the consumer.

Q Explain the following :-
a) Indifference set
b) Indifference Curve
c) Indifference Map
A a) Indifference set is a set of two commodities which offers the consumer same level of satisfaction, so that he is indifferent between these combinations.
b) Indifference Curve is the diagrammatic presentation of an indifference set. it shows the set of two commodities that offers the consumer the same level of satisfaction, so that he is indifferent between these combinations.
c) Indifference Map refers to a set of indifference curve. A Meaning of Consumer Equilibrium :- It is a situation in which a costumer is getting maximum satisfaction and he has no tendency to change his pattern of consumption.

Condition:- MUX = PX

Assumptions :-
a) Utility can be measured in terms of units.
b) Consumer is rational and wants maximum satisfaction.
c) Independent utility
d) MU of money is constant. MU of money is known as worth of a rupee.
e) Law of Diminishing Marginal Utility is applied here

Schedule:- Suppose a consumer is buying orange and the price of each unit of orange is rupee 4, hypothetical MU of orange is given as

Units
MUX
PUX
1
8
4
2
6
4
3
4
4
4
2
4

Explanation of schedule :- It is evident from the schedule that consumer will purchase four oranges and reaches an equilibrium position.
In this situation the position of the consumer equilibrium MUX (in rupee) is equal to PX is satisfied.