11 Notes High Quality Free | Consumer Equilibrium Class

A budget line is a line that shows all possible combinations of two commodities that a consumer can purchase, given his money income and the prices of the two commodities.

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Two indifference curves cannot cross each other, as that would violate the assumption of transitivity and consistency. Marginal Rate of Substitution (MRS) consumer equilibrium class 11 notes free

4. Consumer Equilibrium Under Utility Analysis (Cardinal Approach)

As a consumer consumes more units of a commodity, the utility derived from each successive unit decreases. A budget line is a line that shows

Equation: Px⋅X+Py⋅Y=MEquation: cap P sub x center dot cap X plus cap P sub y center dot cap Y equals cap M Properties of Indifference Curves IC slopes downward from left to right (negative slope). IC is convex to the origin due to diminishing MRS. Higher IC represents higher levels of satisfaction. Two indifference curves can never intersect each other. Equilibrium Condition under IC Analysis

It is a family or set of indifference curves. Higher indifference curves represent higher levels of satisfaction. If you share with third parties, their policies apply

The additional utility derived from consuming one more unit of a commodity.

The IC must be convex to the origin at the point of equilibrium. 3. Key Terms for Exams

Before diving into the equilibrium conditions, you must understand these foundational concepts: 1. Utility (Total vs. Marginal)