The point at which a consumer reaches optimum utility, or satisfaction, from the goods and services purchased given the constraints of income and prices. This is based on the assumption that consumers attempt to get maximum utility from their purchases and that competition exists for the item in question. Equilibrium is reached when the consumer purchases the assortment of goods which best meets his satisfaction requirements given his financial constraints.
Consumer’s Equilibrium refers to
the situation when a consumer is having maximum satisfaction with limited
income and has no tendency to change his way of existing expenditure. The
consumer has to pay a price for each unit of the commodity. So, he cannot buy
or consume unlimited quantity. As per the Law of DMU, utility derived from each
successive unit goes on decreasing. At the same time, his income also decreases
with purchase of more and more units of a commodity.
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