Explain the conditions of consumer’s equilibrium using Indifference Curve Analysis.
ANSWER: a consumer is said to be in equilibrium when he maximizes his satisfaction,given his income and prices of two goods. He attains equilibrium at that point where the slope of IC is equal to the slope of budget line.
- The first one, the budget line should be tangent to the indifference curve.
2 . The slope of indifference curve should be equal to slope of budget line.
3 IC must be converted convex Otto the origin.