Consumer's Equilibrium Position when Buying Only One Commodity

When a consumer is buying only one commodity, their equilibrium position is determined by the principle of marginal utility. Marginal utility refers to the additional utility or satisfaction that a consumer derives from consuming one additional unit of a commodity.

1. Law of Diminishing Marginal Utility
The law of diminishing marginal utility states that as a consumer consumes more and more units of a commodity, the additional utility derived from each additional unit decreases. This means that the marginal utility of the first unit consumed is higher than the second unit, the marginal utility of the second unit is higher than the third unit, and so on.

2. Marginal Utility Schedule
The consumer's equilibrium position can be determined by constructing a marginal utility schedule. A marginal utility schedule is a tabular representation of the utility derived from each additional unit of a commodity consumed.

3. Equilibrium Position
The consumer's equilibrium position is reached when the marginal utility derived from consuming the last unit of the commodity is equal to the price of the commodity. At this point, the consumer maximizes their satisfaction or utility within the constraints of their budget.

To explain this concept, let's consider an example of a consumer buying apples. The marginal utility schedule for the consumer is as follows:

Units of Apples Marginal Utility
1 10
2 8
3 6
4 4
5 2

In this example, the consumer's equilibrium position will be determined by the marginal utility of the last unit of apple consumed, which is 2. If the price of the apple is $2, then the consumer's equilibrium position is reached when they consume 5 units of apples.

4. Consumer Surplus
The consumer's equilibrium position also leads to the concept of consumer surplus. Consumer surplus refers to the difference between the total utility a consumer is willing to pay for a commodity and the actual price paid. In this case, the consumer surplus is the difference between the total utility derived from consuming 5 units of apples (30) and the price paid for 5 units of apples ($10), which is $20.

Conclusion
In conclusion, when a consumer is buying only one commodity, their equilibrium position is determined by the principle of marginal utility. The consumer reaches equilibrium when the marginal utility of the last unit consumed is equal to the price of the commodity. This concept helps maximize the consumer's satisfaction and leads to the concept of consumer surplus.

Consumer's Equilibrium Position and Marginal Utility Schedule

Consumer equilibrium refers to the point at which a consumer maximizes their satisfaction or utility from the consumption of goods and services, given their budget constraint. It is the optimal combination of goods that a consumer can afford and derive the highest utility from.

1. Marginal Utility
- Marginal utility measures the additional satisfaction or utility gained from consuming one additional unit of a good or service.
- The law of diminishing marginal utility states that as a consumer consumes more units of a good, the marginal utility derived from each additional unit decreases.

2. Marginal Utility Schedule
- A marginal utility schedule is a table that shows the amount of marginal utility derived from each unit of a good consumed.
- It helps in determining the consumer's equilibrium position by comparing the marginal utilities and prices of different goods.

3. Consumer's Equilibrium Position
- The consumer's equilibrium position can be determined by analyzing the marginal utility schedule and the budget constraint.
- The consumer will allocate their limited income in such a way that the marginal utility per dollar spent is equal for all goods.

4. Example
Let's consider a consumer who is buying only one commodity, say apples. The consumer has a limited income and wants to maximize their satisfaction from consuming apples.

- The marginal utility schedule for apples shows the additional utility derived from consuming each additional apple. As per the law of diminishing marginal utility, the marginal utility will decrease with each additional apple consumed.
- The consumer will continue to consume apples until the marginal utility derived from the last apple consumed is equal to the price of the apple.
- For example, if the price of the apple is $2 and the marginal utility derived from the fifth apple is 8 units, the consumer will stop consuming apples at this point because the marginal utility per dollar spent is 4 units ($2/8 units).
- If the consumer decides to consume more apples, the marginal utility derived from each additional apple will be less than the price, resulting in a lower marginal utility per dollar spent.
- On the other hand, if the consumer decides to consume fewer apples, the marginal utility derived from the last apple consumed will be higher than the price, indicating that the consumer can derive more utility by consuming an additional apple.
- Thus, the consumer's equilibrium position is reached when the marginal utility per dollar spent is equal for all goods. In this case, it is when the marginal utility derived from the last apple consumed is equal to the price of the apple.

In conclusion, a consumer's equilibrium position when buying only one commodity can be determined by analyzing the marginal utility schedule and comparing the marginal utility per dollar spent. The consumer will allocate their limited income in a way that maximizes their satisfaction by equating the marginal utility derived from the last unit of the commodity to its price.