Consumer Equilibrium Class 11 Notes -

Rahul uses logic. He compares the satisfaction he gets (MU) with the price he pays. Since the price is ₹10, he converts this price into "utils" by dividing it by the price. (This is called Marginal Utility of Money).

: The slope of the Indifference Curve (MRS) must equal the slope of the Budget Line (Price Ratio). consumer equilibrium class 11 notes

[ MU_x = P_x ] Where $MU_x$ = Marginal Utility of good X (in utils converted to money terms). Rahul uses logic

IC1: X + 2Y = 20 IC2: 2X + 3Y = 30 IC3: 3X + 4Y = 40 (This is called Marginal Utility of Money)

The budget line shows all possible combinations of two goods that a consumer can buy with their entire income at given prices. 6. Conditions for Equilibrium (IC Approach)