Question

explain consumer equilibirium under ordinal approach diagram and mathematically

Answer 1

http://business-finance.blurtit.com/122230/can-you-explain-the-ordinal-approach-to-consumer-equilibrium.

Answer 2

Consumer equilibrium is the balance of consumers income in relation to the amount of products they can purchase. An example would be a person who makes $250 per week and can afford to purchase a $10 take out meal each week. They are able to make this purchase because they have enough money based on the current prices in relation to the amount of money they make.


Under ordinal approach

Necessary Condition: 'Budget line is tangent to the highest possible indifference curve.
2- Sufficient Condition: 'At equilibrium, Indifference curve must be convex to the origin' Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve) (In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)


Diagram