Consumer Equilibrium Class | 11 Notes Free [work]

): The sum of total satisfaction derived from consuming all units of a commodity. Marginal Utility ( MUcap M cap U

Visualise the graph: You have a (what you can afford) and an Indifference Map (a set of ICs representing what you prefer ). The highest level of satisfaction you can achieve occurs at the point where the Budget Line is tangent (touches) the highest possible Indifference Curve. consumer equilibrium class 11 notes free

Utility is the want-satisfying power of a commodity. It is completely subjective and varies from person to person, place to place, and time to time. The imaginary metric unit used to measure utility. ): The sum of total satisfaction derived from

: The sum total of satisfaction derived from consuming all units of a commodity. Utility is the want-satisfying power of a commodity

Developed by Alfred Marshall, this assumes utility can be measured in "utils." The consumer is at equilibrium when: (Where MUxcap M cap U sub x is Marginal Utility of good X and Pxcap P sub x is its Price) : Consumer buys more (increasing satisfaction). : Consumer buys less (utility is less than cost).

A consumer reaches equilibrium when the ratio of MU to price is the same for all goods. (Marginal Utility of Money) 3. The Indifference Curve (IC) Approach (Ordinal Utility)