CONSUMERS EQUILIBRIUM When a consumer gets maximum satisfaction out of a commodity. This situation is known as consumer equilibrium.

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Presentation transcript:

CONSUMERS EQUILIBRIUM When a consumer gets maximum satisfaction out of a commodity. This situation is known as consumer equilibrium.

Utility analysis : 1.Initial utility – which is achieved by the consumption of the first unit of any commodity is called initial utility. 2.Marginal utility – The most important concept of this analysis is that utility gain from the consumption of an extra unit of commodity is called marginal utility. MU=TUn-TUn-1

LAW OF DIMINISHING MARGINAL UTILITY - The law of diminishing marginal utility shows that when consumers consumes many units of a commodity continuosly then then total utility is gain from this increases but this increase in utility is at a diminishing rate.

In difference curve - An indifference curve is a locus of various combination of two commodities which yield the same total satisfaction the consumer. The consumer is indifferent towards any of these combination of the two commodities. Properties - 1. an indifference curve slopes downwards from the left to right 2. An indifference curve is convex to the origin 3.IT need not be perllel to each other.

ASSIGNMENT:= 1.What is utility? What is marginal utility? What is indifference curve? Define consumer equilibrium? What is laws of diminishing marginal utility? i what are the properties of the indifference curve?