Posted by Anjali Kaur on Jul 01, 2020

# What are the conditions of consumer’s equilibrium under utility analysis?

This is an interesting topic for all economics students to learn. Although this theory does not apply practically, it forms the basis for consumer behavior. So, today we will learn the consumer’s equilibrium under utility analysis with one and two goods conditions. Let’s learn.

A quick note: Subscribe to our website to get answers to your curriculum questions.

Also, subscribe to my YouTube channel. But before subscribing, check it out.

Disclosure: Some of the links on the website are ads, meaning at no additional cost to you, I will earn a commission if you click through or make a purchase. Please support me so that I can continue writing great content for you.

## What is consumer equilibrium?

Consumer equilibrium refers to a situation where a consumer spends his given income on the purchase of a commodity in such a way that he gets maximum satisfaction.

### The conditions of a consumer equilibrium using utility analysis or marginal utility analysis

1. In the case of a single commodity or one commodity: The following conditions should be met;
1. MUx=Price; This condition means that the satisfaction derived from the consumption of a commodity ‘x’ should be equal to the price paid for ‘x’.
2. MUx/Px=MUm; This condition means that the ratio of marginal utility of a commodity ‘x’, that is, the satisfaction derived from the consumption of a commodity, divided by the price paid for it should equate the marginal utility of money (m).
3. MU of money should remain constant.
4. The law of diminishing marginal utility must hold.
2. In the case of two commodities: The following conditions should be met;
1. MUx=MUy=Price; This condition is used when the price of both goods (x and y are two goods here) is the same.
2. MUx/Px=MUy/Py=MUm; This condition is used when the price of both the goods is different.
3. MU of money should remain constant.
4. The law of diminishing marginal utility must hold.

You can refer to this presentation for more clarity:

Thank You!

You can read more related posts:

Happy Learning!

Disclosure: Some of the links on the website are ads, meaning at no additional cost to you, I will earn a commission if you click through or make a purchase. Please support me so that I can continue writing great content for you.