Consumer Equilibrium Class 11 Notes Free [better] <RECOMMENDED | 2024>

A state of rest where there is no incentive to change behavior.

Given: MUx = 15 utils, Px = ₹5 → MUx/Px = 15/5 = 3 MUy = 20 utils, Py = ₹4 → MUy/Py = 20/4 = 5 Since MUx/Px (3) < MUy/Py (5) , the consumer is not in equilibrium . He is getting more satisfaction per rupee from good Y. To reach equilibrium, he should buy more of good Y and less of good X . This will cause MUy to fall and MUx to rise until the ratios become equal.

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The Law of Diminishing Marginal Utility states that as a consumer consumes more and more units of a commodity continuously, the marginal utility derived from each successive unit declines. Assumptions of the Law: consumer equilibrium class 11 notes free

Utility is the want-satisfying power of a commodity. It varies from person to person, place to place, and time to time. It is a subjective concept, meaning it cannot be physically measured, though economists use hypothetical units to analyze it. Measurement of Utility

Consumer equilibrium occurs when a consumer spends their limited income on various goods in such a way that they maximize their total satisfaction (utility) and has no tendency to change their consumption pattern, given market prices. 1. Understanding Utility

| Units | MU_x | MU_y | | :--- | :--- | :--- | | 1 | 50 | 80 | | 2 | 40 | 70 | | 3 | 30 | 60 | | 4 | 20 | 50 | | 5 | 10 | 40 | A state of rest where there is no

There are two primary methods used in Class 11 Microeconomics to study this concept: Cardinal Utility Approach (Marshallian Analysis):

Check if the budget is fully spent: Income (M) = (Px × Units of X) + (Py × Units of Y) = (8 × 3) + (4 × 5) = 24 + 20 = ₹44. The budget (M) is given as ₹40, so the expenditure (₹44) exceeds the income. So, this combination is not affordable.

When consumption increases beyond satiety, MU becomes negative and TU starts falling. 3. Consumer Equilibrium: Cardinal Utility Approach To reach equilibrium, he should buy more of

The consumer reaches equilibrium where the budget line is tangent to the highest possible indifference curve. :

The consumer will allocate income such that the last rupee spent on each good yields the same marginal utility .

[ MRS_xy = \fracP_xP_y ] (MRS = Marginal Rate of Substitution = Slope of IC)

| Units | ( MU_x ) | ( MU_y ) | | :---: | :---: | :---: | | 1 | 16 | 11 | | 2 | 14 | 10 | | 3 | 12 | 8 | | 4 | 10 | 6 |