consumer equilibrium

Consumer equilibriumclick for a larger image
Fig. 30 Consumer equilibrium. The optimal combination of Good X and Good Y is at point E when the BUDGET LINE is tangential to indifference curve 1. At this point the slope of the budget line (the ratio of prices)

consumer equilibrium

the point at which the consumer maximizes his TOTAL UTILITY or satisfaction from the spending of a limited (fixed) income. The economic ‘problem’ of the consumer is that he has only a limited amount of income to spend and therefore cannot buy all the goods and services he would like to have. Faced with this constraint, demand theory assumes that the goal of the consumer is to select that combination of goods, in line with his preferences, that will maximize his total utility or satisfaction. Total utility is maximized when the MARGINAL UTILITY of a penny's worth of good X is exactly equal to the marginal utility of a penny's worth of all the other goods purchased; or, restated, when the prices of goods are different, the marginal utilities are proportional to their respective prices. For two goods, X and Y, total utility is maximized when:

Consumer equilibrium can also be depicted graphically using INDIFFERENCE CURVE analysis. See Fig. 30 . See also REVEALED PREFERENCE THEORY,PRICE EFFECT, INCOME EFFECT, SUBSTITUTION EFFECT, ECONOMIC MAN, CONSUMER RATIONALITY, PARETO OPTIMALITY is equal to the slope of the indifference curve (the ratio of marginal utilities), so the goods’ marginal utilities are proportional to their prices.

References in periodicals archive ?
IRI) has found a new consumer equilibrium emerging as the economy transforms.
Since the beginning of 2009, a new consumer equilibrium has emerged in which behaviors first implemented to weather a storm have the potential to last well beyond an economic recovery," says IRI consulting and innovation president Thom Blischok.
Point A is, in effect, a consumer equilibrium for the product given income, price of product, and tastes.
The person is lowered in his consumer equilibrium to B where 900 packages are purchased at $3.
Budget line Z enables the typical person to achieve consumer equilibrium at some point C, which represents more utility than B but less than A The effect of either type tax is to lower a person's utility from what it could be, but the excise tax lowers it more than does the income tax.
This section derives the condition for consumer equilibrium.
The present analysis differs from utility-based demand theory in having its consumer equilibrium condition in the form of a single equation:
It was established in the discussion of consumer equilibrium that if, for a good, MRS [less than] RP, the consumer will prefer over it a bundle with less of that good.
k] for k = h, l, a consumer equilibrium is generated by (8) [Mathematical Expression Omitted] for i, j = d, f; i [is not equal to] j and [p.
Since the beginning of 2009, a new consumer equilibrium has emerged in which behaviors initially implemented to weather the storm have the potential to last well beyond an economic recovery," says IRI Consulting and Innovation President Thom Blischok.
The present analysis differs from utility-based demand theory by having its consumer equilibrium condition in the form of a single equation:
It was established in the discussion of consumer equilibrium that if, for a good, MRS [less than] RP, then the consumer will more prefer a bundle with less of that good.

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