| Approach | Name | Key Concept | Applicability | | :--- | :--- | :--- | :--- | | | Single Commodity Case | MU(_x) = P(_x) | One good only | | 2 | Two Commodity Case | ( \fracMU_xP_x = \fracMU_yP_y = MU_m ) | Multiple goods (real life) |
A consumer is said to be in equilibrium when they maximize their total utility (satisfaction) given their income and the prices of goods, and have no incentive to change their spending pattern.
: The consumer gets more satisfaction than the price paid. They will consume more, and MUxcap M cap U sub x will fall (due to LDMU) until If
Additional utility gained from consuming one more unit of a commodity. ( consumer equilibrium class 11 notes free
The sum total of satisfaction derived from consuming all units of a commodity ( Marginal Utility (MU): The additional satisfaction from consuming one more unit ( Law of Diminishing Marginal Utility (DMU):
Assumption: The consumer spends their entire income on a single good (say, Good X), and the price is fixed.
(In Cardinal Utility analysis) Utility can be measured in 'utils'. 2. Cardinal Utility Analysis (Marshallian Approach) | Approach | Name | Key Concept |
Try : MU(_y)/P(_y) = 5. Not equal. ❌
A curve showing combinations of two goods that give the consumer equal satisfaction.
MUXPriceX=MUYPriceY=MUMthe fraction with numerator MU sub cap X and denominator Price sub cap X end-fraction equals the fraction with numerator MU sub cap Y and denominator Price sub cap Y end-fraction equals MU sub cap M The consumer gets more utility per rupee from Good . They buy more . This lowers MUXMU sub cap X and raises MUYMU sub cap Y until equality is restored. If : The consumer gets more utility per rupee from Good . They buy more until the ratios match. 4. Consumer's Equilibrium: Indifference Curve (IC) Approach ( The sum total of satisfaction derived from
A consumer is an economic agent who purchases goods and services to satisfy their wants.
The want-satisfying power of a commodity. It is subjective and varies from person to person.
Utility can be measured in exact numbers (1, 2, 3). Relationship Between TU and MU Units Consumed Total Utility (TU) Marginal Utility (MU) Phase Description MU is positive; TU increases MU decreases; TU increases at a diminishing rate MU decreases; TU increases at a diminishing rate MU decreases; TU increases at a diminishing rate Point of Satiety : TU is maximum; MU is zero MU becomes negative; TU begins to fall Phase 1: As long as MU is positive, TU increases.