Question

State the condition of consumer's equilibrium in terms of the indifference curve approach.

Answer 1

The budget line and the consumer's indifference map are used in the indifference curve approach to explain the consumer's equilibrium. For the consumer to be in equilibrium, two requirements must be met:

1. MRS_xy = `P_x/P_y`. This a necessary but not sufficient condition for equilibrium.
2. The indifference curve should be convex to the origin.