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Explain the consumer equilibrium with the help of indifference curve?
Wiki User
∙ 13y ago
Explain the consumer equilibrium with the help of indifference curve?
Wiki User
∙ 13y ago
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What is Consumer equilibrium under ordinal utility approach?
Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach 1- Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.' 2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
What is the relationship between indifference curve and budget constraint?
The tangency point of Indifference curve and budget line shows the Marginal Rate of Substitution between X and Y commodities. Consumer's equilibrium is achieved at that point.
Explain the consumers equilibrium with the help of indifference curve technique?
Meaning of Consumer's equilibriumConsumer's equilibrium is that point in which consumer consumes the combination of two goods by his limited income. He gets maximum satisfaction from these goods and never changes this situation. If he will change this point, his level of satisfaction will decrease.We can explain consumer's equilibrium with the help of indifference curve. Before explain this we need to understand following termsIndifference curveIndifference curve shows the combination of two goods which a consumer is consuming. For increasing one good's one unit, he has to leave some quantities of other second goods. The sacrificing of second goods quantity will decreasing because, law of diminishing marginal rate of substitute will apply on it.Income apple ( 0.50 per unit ) orange ( Rs. 1 per unit ) Four rupees 8 0 Four rupees 6 1 Four rupees 4 2 Four rupees 2 3 Four rupees 0 4Condition of Consumer EquilibriumPrice line must be the tangent to indifference curveIt is not necessary that price line cut indifference curve, but it is important that price line must be tangent to indifference curve. Price line when touches indifference curve, then it means that Marginal rate of substitute of apple and orange will equal to the ratio of price of apple and orange .
What is the different between indifference map and indiffirence curve?
Indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. Indifference map, on the other hand Indifference curve is a graph of two or more indifference curves.
What is the tangent between a budget constraint and an indifference curve on an indifference map?
It is the equilibrium point of utility maximization.
What is Consumer equilibrium under ordinal utility approach?
Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach 1- Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.' 2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
What is the relationship between indifference curve and budget constraint?
The tangency point of Indifference curve and budget line shows the Marginal Rate of Substitution between X and Y commodities. Consumer's equilibrium is achieved at that point.
Explain the consumers equilibrium with the help of indifference curve technique?
Meaning of Consumer's equilibriumConsumer's equilibrium is that point in which consumer consumes the combination of two goods by his limited income. He gets maximum satisfaction from these goods and never changes this situation. If he will change this point, his level of satisfaction will decrease.We can explain consumer's equilibrium with the help of indifference curve. Before explain this we need to understand following termsIndifference curveIndifference curve shows the combination of two goods which a consumer is consuming. For increasing one good's one unit, he has to leave some quantities of other second goods. The sacrificing of second goods quantity will decreasing because, law of diminishing marginal rate of substitute will apply on it.Income apple ( 0.50 per unit ) orange ( Rs. 1 per unit ) Four rupees 8 0 Four rupees 6 1 Four rupees 4 2 Four rupees 2 3 Four rupees 0 4Condition of Consumer EquilibriumPrice line must be the tangent to indifference curveIt is not necessary that price line cut indifference curve, but it is important that price line must be tangent to indifference curve. Price line when touches indifference curve, then it means that Marginal rate of substitute of apple and orange will equal to the ratio of price of apple and orange .
What is the different between indifference map and indiffirence curve?
Indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. Indifference map, on the other hand Indifference curve is a graph of two or more indifference curves.
Derivation of demand curve using the indifference curve approach?
The derivation of an individual consumer demand curve can be done using the indifference curve approach. This is done by preparing the demand schedule of a consumer from the price consumption curve.
What is the tangent between a budget constraint and an indifference curve on an indifference map?
It is the equilibrium point of utility maximization.
What is difference between indifference curve and budget line?
budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
What is a Price line?
A price consumption lines show a consumer's demand for a good or service after price changes. It is draw through the equilibrium of an indifference curve and the budget line
What is a price consumption line?
A price consumption lines show a consumer's demand for a good or service after price changes. It is draw through the equilibrium of an indifference curve and the budget line
How the indifference curve and budget line apparatus are used to derive a consumer's demand curve?
Indifference curve: series of curve reflecting the preference structure of the individual. Budget constraint: the material resource constraint the individual faces in choices. The demand curve, being inherently designated as rational, seeks to maximise utility. Thus, in a Walrasian equilibrium, the consumer construct his demand curve at the points where his contract curve equals to his budget constraint (or, in mathematical terms, when the constraint and optimal indifferences are tangent to one another). These tangencies construct a curve which is the individual's demand function.
What is the difference between marginal utility and indifference curve?
Marginal utility is the satisfaction a consumer receives from consuming an additional unit of a good The indifference curve shows different combinations of 2 goods that the consumer is indifferent towards
Definitions of indifference curve by j r hicks?
Indifference curve is locus of point of one combination of two product consume by consumer. To make satisfaction constant consumer if increase one product he have to sacrifice other product unit.
