Question

Briefly explain the concept of consumer’s equilibrium.

Answer 1

Consumer’s equilibrium refers to a situation under which a consumer spends his entire income on the purchase of goods, in such a manner that it gives him maximum satisfaction.
The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve

At equilibrium MRS_xy = `"PX"/"Py"`

T is the point of Equilibrium as budget line AB is tangent on indifference curve IC₃, the upper IC implies a maximum level of satisfaction.