Consumer’s equilibrium can be defined as a situation when the consumer spends his income on purchasing one or more goods and gets maximum satisfaction. Consumer equilibrium enables a consumer to get the most satisfaction and fulfillment possible from their income.

Consumer Equilibrium in a Single Commodity

When a consumer buys one product for a long term, he stops buying it when its utility and cost are equated. At this point, the total utility is at maximum, and the consumer is said to be in equilibrium.

They receive the ultimate satisfaction and will neither buy more or less of that product. However, only a shift in price will change the quantity demanded.

Equilibrium in More Than One Commodity

According to Mashallian utility analysis,  a consumer is n equilibrium when the marginal utility for each purchase of a product is the same. After which the consumer will have no desire to purchase extra of one commodity or less of another.

The consumer is said to be in equilibrium when his wants and income is equalized, and maximum satisfaction is obtained. After that, there will be no temptation left to change his scheme of payment or quantity. He will keep buying the same goods in the equal quantities till his salary, desires or costs change. Suppose the cost of one goods increases, the consumer will buy less of these goods and more of the other products so that the proportion will be restored.

To obtain the maximum satisfaction from the money a consumer has, they will distribute the expense in different goods, and the marginal utility of the good bought will be in proportion to their prices.

A consumer will be in equilibrium when: M.U. of X /price of X = M.U. of Y / price of Y/ M.U. of Z / price of Z = k

In general, a consumer’s equilibrium analysis is done according to the concept of utility; it is, therefore, known as analysis of consumer’s behavior or demand. However, modern economists analyze consumer’s equilibrium with the help of indifference curves.

The details mentioned above are required to have a basic knowledge of Consumer Equilibrium. For more information on class 12 economic syllabus or economics sample paper class 12, stay tuned to BYJU’S.