Consumer Equilibrium in Case of Single Commodity and Utility Approach

Consumer equilibrium refers to the state where a consumer maximizes their satisfaction or utility by allocating their limited income among different goods and services. In the case of a single commodity and utility approach, the consumer aims to achieve equilibrium by considering the utility derived from consuming different quantities of the same commodity.

The Utility Approach
The utility approach is based on the assumption that consumers make rational choices to maximize their satisfaction or utility. It is measured in terms of utils, which represent the level of satisfaction or pleasure a consumer derives from consuming a particular commodity.

Law of Diminishing Marginal Utility
According to the law of diminishing marginal utility, as a consumer consumes more and more units of a commodity, the additional utility or satisfaction derived from each additional unit decreases. In other words, the marginal utility of a commodity decreases as its consumption increases.

Consumer Budget Constraint
In order to achieve consumer equilibrium, the consumer needs to consider their budget constraint. The budget constraint represents the limited income of the consumer, which restricts their consumption choices. It can be represented by the equation: Income = Price × Quantity.

Consumer Equilibrium
To achieve consumer equilibrium, the consumer needs to allocate their limited income in such a way that the marginal utility per unit of money spent on each commodity is equal. This can be explained using the following steps:

1. Calculate the marginal utility (MU) of each unit of the commodity consumed.
2. Calculate the price of the commodity (P).
3. Divide the marginal utility by the price to get the marginal utility per unit of money spent (MU/P) for each unit of the commodity consumed.
4. Compare the marginal utility per unit of money spent for each unit of the commodity consumed.
5. Continue consuming additional units of the commodity until the marginal utility per unit of money spent is equal for all units consumed.

Consumer Equilibrium Condition
The consumer equilibrium condition in this case can be stated as:
MU1/P1 = MU2/P2 = MU3/P3 = ... = MUn/Pn

Where MU1, MU2, MU3, ..., MUn represent the marginal utilities derived from consuming each unit of the commodity, and P1, P2, P3, ..., Pn represent the prices of each unit of the commodity.

Graphical Representation
Consumer equilibrium can also be represented graphically by plotting the marginal utility per unit of money spent on the y-axis and the quantity consumed on the x-axis. The consumer equilibrium is achieved at the point where the marginal utility per unit of money spent is equal for all units consumed.

Conclusion
Consumer equilibrium in the case of a single commodity and utility approach is achieved when the consumer allocates their limited income in such a way that the marginal utility per unit of money spent is equal for all units consumed. This allows the consumer to maximize their satisfaction or utility from consuming the commodity. By considering the law of diminishing marginal utility and the consumer's budget constraint, the consumer can make rational choices to achieve equilibrium.

To determine the equilibrium point , consumer compare the prices (or cost) of the given commodity with its utility ( satisfaction or Benefits). Being a rational consumer he will be at equilibrium when marginal utility is equal to price paid for the commodity....