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?