Alfred Marshall assumed that utility can be measured cardinally. We analyze equilibrium under two scenarios. Case A: Single Commodity Framework A consumer buying a single commodity (
The value or "importance" of money remains constant for the consumer.
: The consumer will buy more of X and less of Y until the ratios become equal again. 5. Indifference Curve (IC) Analysis consumer equilibrium class 11 notes free
) falls, the budget line pivots outward. The consumer can now afford a higher indifference curve, changing the equilibrium point to a higher level of utility. What is the "law of equi-marginal utility"?
| Feature | Utility Approach | Indifference Curve Approach | | :--- | :--- | :--- | | | Cardinal (utils) | Ordinal (ranking) | | Assumption | MU diminishes | MRS diminishes | | Tools | MU, TU | IC, Budget Line | | Equality condition | ( MU_x/P_x = MU_y/P_y ) | ( MRS_xy = P_x/P_y ) | | Income effect | Assumes constant MU of money | Handles income effect via budget shifts | Alfred Marshall assumed that utility can be measured
A consumer will achieve maximum satisfaction when the ratio of the marginal utility of a good to its price is the same for all goods. (Where are different goods, and MUMcap M cap U sub cap M is the Marginal Utility of Money) The Role of Marginal Utility of Money ( MUMcap M cap U sub cap M
The Law of Diminishing Marginal Utility states that as more and more units of a commodity are consumed, the utility derived from each successive unit goes on decreasing. : The consumer will buy more of X
The slope of the Indifference Curve must equal the slope of the Budget Line.
Consumer's Equilibrium: Class 11 Economics Notes Consumer's equilibrium is a core concept in microeconomics. It explains how a consumer spends their limited income across different goods to achieve maximum satisfaction.
between marginal and total utility in more detail Let me know which topic you'd like to dive into! Share public link
