As a consumer consumes more and more units of a commodity, the marginal utility derived from each successive unit goes on diminishing [2]. 3. Approaches to Consumer Equilibrium
: The sum total of satisfaction derived from consuming all units of a commodity.
must be diminishing (IC must be convex at the point of tangency). 4. Key Definitions Summary (Fast Revision) MRScap M cap R cap S consumer equilibrium class 11 notes free
Explain the difference between the approaches in more detail?
When consumption increases beyond satiety, MU becomes negative and TU starts falling. 3. Consumer Equilibrium: Cardinal Utility Approach As a consumer consumes more and more units
This occurs when a consumer spends all of his income on a single commodity, say 'X'. The consumer is in equilibrium when the marginal utility of the commodity (MUx) is equal to its price (Px). The condition is: $$MU_x = P_x$$
“I feel perfect,” Rohan said. “No craving for more.” must be diminishing (IC must be convex at
PxPythe fraction with numerator cap P sub x and denominator cap P sub y end-fraction