Want this question answered?
Explain the consumer equilibrium with the help of indifference 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.
budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
its something to do with a non satiation assumption. ie if all the bundles on the indifference curve are "goods" (actively wanted products) then the indifference curve slopes downward from L to R. if there is a "good" and a "bad" on the curve then it will be positively sloped. (upward from L to R)
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.)
Explain the consumer equilibrium with the help of indifference curve?
indifference curves slopes downward to the right
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.
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.
budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
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
its something to do with a non satiation assumption. ie if all the bundles on the indifference curve are "goods" (actively wanted products) then the indifference curve slopes downward from L to R. if there is a "good" and a "bad" on the curve then it will be positively sloped. (upward from L to R)
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.)
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.
When income of consumer incresing this will lead the indifference curve to shift out ward in case for normal goods.So incresing in income of consumer it lead to incresing the purchasing power of consumer or consumer will demand much goods.
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.
The MRS measures how much of a good you are willing to give up in exchange for one more unit of the other good, keeping utility constant. The MRS diminishes along a convex indifference curve in that as you move down along the indifference curve, you are willing to give up less and less of the one good in exchange for the other. The MRS is also the slope of the indifference curve, which increases (becomes less negative) as you move down along the indifference curve. The MRS is constant along a linear indifference curve, since in this case the slope does not change. The consumer is always willing to trade the same number of units of one good in exchange for the other.