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What is consumer equilibrium?

Consumer equilibrium exists when the a.slope of the indifference curve is greater than the slope of the budget constraint. b.consumer is on his highest indifference curve. c.marginal rate of substitution equals the slope of the budget constraint. d.slope of the indifference curve equals the slope of the budget constraint.

What is meant by the term at equilibrium?

5.2.3: Consumer equilibrium A consumer is said to be in equilibrium when she chooses the most satisfying combination. That combination must be affordable by the consumer, meaning that it must be on the consumer’s budget line. The consumer will choose that combination which lies on the highest indifference curve. Graphically, it is represented by the point of tangency of the …

When consumers make choices about the quantity of goods and services?

Oct 15, 2009 · Indifference curve analysis indicates that consumer equilibrium exists: A. where an indifference curve has a slope of 1. B. where any two indifference curves intersect. C. at any point where the budget line intersects an indifference curve. D. where the budget line touches the highest possible indifference curve. D .

What is the consumer's problem in economics?

Jun 05, 2019 · 7. In the Edgeworth box diagram for production, a. A point off the "contract curve" (or "production efficiency locus") cannot have more production of one of the goods than can some point on the curve b. A point off the "contract curve" (or "production efficiency locus") can involve more production of both goods than can any point on the curve c. A movement from …

What is consumer equilibrium?

consumer equilibrium. is the change in total utility from one additional unit of a good or service. marginal utility. The change in quantity demanded of a good or service caused by a change in real income (purchasing power) is called the. income effect.

What is the law of diminishing marginal utility?

law of diminishing marginal utility. A condition in which total utility cannot increase by spending more of a given budget on one good and spending less on another good is called. consumer equilibrium. is the change in total utility from one additional unit of a good or service. marginal utility.

What is income effect?

The income effect refers to a change in: a. the quantity demanded of a good because of a change in the buyer's money income. b. the quantity demanded of a good because of a change in the buyer's real income. c. income because of changes in the CPI.

What is the solution to the consumer's problem?

The solution to the consumer's problem, which entails decisions about how much the consumer will consume of a number of goods and services, is referred to as consumer equilibrium. Determination of consumer equilibrium. Consider the simple case of a consumer who cares about consuming only two goods: good 1 and good 2.

What is the objective of maximizing total utility?

When consumers make choices about the quantity of goods and services to consume, it is presumed that their objective is to maximize total utility. In maximizing total utility, the consumer faces a number of constraints, the most important of which are the consumer's income and the prices of the goods and services that the consumer wishes to consume. The consumer's effort to maximize total utility, subject to these constraints, is referred to as the consumer's problem. The solution to the consumer's problem, which entails decisions about how much the consumer will consume of a number of goods and services, is referred to as consumer equilibrium.

What is consumer equilibrium?

Consumer equilibrium is a point at which a consumer’s derived utility from a commodity is at its maximum, given a fixed level of income and price of that commodity. A rational consumer would not deviate from this point. 2.

Why is equilibrium important?

Importance of Consumer Equilibrium 1 It allows a consumer to maximise his/her utility from the consumption of one or more commodities. 2 It helps arrange the combination of two or more products based on consumer taste and preference for maximum utility.

What is the marginal utility of two or more commodities?

In the case of two or more commodities, the marginal utility derived from one commodity in proportion to its price should be equal to the marginal utility derived from a second commodity in proportion to its price.