Consumer Equilibrium Class 11 Notes Free

| Units | MU(_x) | MU(_x)/P(_x) | MU(_y) | MU(_y)/P(_y) | | :--- | :--- | :--- | :--- | :--- | | 1 | 20 | 10 | 24 | 6 | | 2 | 18 | 9 | 22 | 5.5 | | 3 | 16 | 8 | 20 | 5 | | 4 | 14 | 7 | 18 | 4.5 | | 5 | 12 | 6 | 16 | 4 |

Finding Equilibrium:
We want MU(_x)/P(_x) = MU(_y)/P(_y) with total spending ≤ ₹22.

| Feature | Utility Analysis (Cardinal) | Indifference Curve Analysis (Ordinal) | | :--- | :--- | :--- | | Measurement | Utility is measured in 'utils'. | Utility is ranked (preference order). | | Main Tool | Total and Marginal Utility curves. | Indifference Curves and Budget Line. | | Equilibrium Condition | $MU_x / P_x = MU_y / P_y = MU_m$ | $MRS_xy = P_x / P_y$ | | Assumption | Constant MU of money. | Diminishing MRS. | consumer equilibrium class 11 notes free

  • Interpretation: Last rupee spent on each good gives equal marginal utility.
  • If MUx/Px > MUy/Py → spend more on X, less on Y until equalized.
  • Special case: If one good’s MU falls to zero, spend all on the other if MU/P still higher and budget allows.
  • MRS = MUx / MUy; tangency implies MUx/MUy = Px/Py → same as utility approach.

    • The consumer reaches equilibrium where the Budget Line is tangent to the Indifference Curve.

    Conditions:

  • Diminishing MRS: At the point of tangency, IC must be convex to the origin.

    • Explanation of Condition 1:

    A consumer consumes a good until the point where the satisfaction gained from spending the last rupee is equal to the satisfaction gained from keeping that rupee. | Units | MU(_x) | MU(_x)/P(_x) | MU(_y)

    Conditions:

  • Marginal Utility of Money is constant: The utility of money remains the same (assumed).

    • Explanation: