what is consumer equilibrium in case of single commodity ?
**Consumer Equilibrium in Case of Single Commodity**
Consumer equilibrium refers to the state at which a consumer maximizes their satisfaction or utility given their limited budget. In the case of a single commodity, consumer equilibrium is achieved when the consumer allocates their entire budget in such a way that the marginal utility derived from the last unit of the commodity consumed is equal to the price of the commodity. This condition is known as the Law of Equi-Marginal Utility.
**Law of Equi-Marginal Utility**
The Law of Equi-Marginal Utility states that a consumer maximizes their satisfaction when they allocate their income in such a way that the utility derived from the last unit of money spent on each commodity is equal. In other words, the consumer should allocate their budget in a way that the marginal utility per rupee spent is equal for all commodities.
**Determinants of Consumer Equilibrium**
Consumer equilibrium is influenced by several factors, including:
1. **Total Budget**: The consumer's total budget determines their purchasing power and the quantity of the commodity they can afford.
2. **Price of the Commodity**: The price of the commodity affects the quantity that can be purchased within the given budget.
3. **Consumer's Preferences**: The consumer's preferences or tastes for the commodity play a crucial role. The utility derived from each unit of the commodity consumed varies based on individual preferences.
4. **Marginal Utility**: The consumer's marginal utility derived from each additional unit of the commodity consumed decreases as consumption increases. This is known as the law of diminishing marginal utility.
**Attaining Consumer Equilibrium**
To attain consumer equilibrium in the case of a single commodity, the consumer needs to allocate their budget in a way that satisfies the following condition:
**MUx / Px = MUy / Py**
Where:
- MUx is the marginal utility of the commodity consumed (x).
- Px is the price of the commodity (x).
- MUy is the marginal utility of the commodity not consumed (y).
- Py is the price of the commodity (y).
By equating the marginal utilities per rupee spent on each commodity, the consumer reaches a state where the satisfaction derived from the last unit of money spent on each commodity is equal.
**Conclusion**
Consumer equilibrium in the case of a single commodity is achieved when the consumer allocates their budget in a manner that the marginal utility per rupee spent on the commodity equals the marginal utility per rupee spent on other commodities. This ensures that the consumer maximizes their satisfaction or utility given their limited budget. The Law of Equi-Marginal Utility guides the consumer in making rational choices and achieving equilibrium.
what is consumer equilibrium in case of single commodity ?
When a consumer purchase a single commodity will be at equilibrium when he is purchasing such a quantity of a commodity ,which gives him maximum satisfaction or utility with given income of the consumer.
MUx =Px
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