Show diagrammatically the conditions for consumer's equilibrium, in Hicksian analysis of demand.

Open in App

Solution

In the Hicksian/ Indifference Curve analysis, a consumer attains equilibrium when
(i) Budget line is tangential to the indifference curve at a unique combination of two goods.
i.e, Slope of indifference Curve = Slope of Budget line
or $M R S_{x y} = (-) \frac{P_{x}}{P_{y}}$
(ii) Indifference Curve is strictly convex to origin at the point of tangency
i.e, $M R S_{x y}$ Must be diminishing

Explanation to the diagram

Suggest Corrections

Similar questions

Show diagrammatically the conditions for consumer ’s equilibrium, in Hicksian analysis of demand.

A consumer consumes only two goods. Explain the conditions of consumer's equilibrium with the help of the Utility Analysis.

A consumer consumes only two goods X and Y. Explain the conditions of consumer's equilibrium using marginal utility analysis.

X

Y

X

X

Join BYJU'S Learning Program