Consumer equilibrium is a state of maximum satisfaction achieved by a consumer when they spend their given income on purchasing one or more commodities, taking into account the prevailing prices of the commodities
. It is a situation where a consumer's derived utility from a commodity is at its given fixed level of income and price of that commodity, and they have no propensity to deviate from this point
. In the context of a single commodity, consumer equilibrium is achieved when the marginal utility (MU) of the commodity in terms of money is equal to its price (P), i.e., MUx (in utils) = Px (in ₹)
. Some key points about consumer equilibrium include:
- It is a state of balance obtained by an end-user of products, allowing them to get the most satisfaction possible from their income
- Consumer equilibrium is dependent on the price of a product, as consumers derive utility from each commodity they consume
- A rational consumer would not deviate from the point of consumer equilibrium, as it provides them with maximum satisfaction
For example, if a consumer spends ₹30 on an ice cream scoop and derives 3 utils of satisfaction from it, they are in a state of consumer equilibrium. This is because the marginal utility of the ice cream scoop (MUx) is equal to its price (Px), i.e., 3 utils = ₹30
