Question : The concept of consumer equilibrium refers to a situation where:
Option 1: The consumer is maximizing total utility.
Option 2: The consumer is maximizing marginal utility.
Option 3: The consumer is consuming goods in equal proportions.
Option 4: The consumer is consuming goods within the budget constraint.
Correct Answer: The consumer is maximizing marginal utility.
Solution : The correct answer is (b) The consumer is maximizing marginal utility.
Consumer equilibrium occurs when a consumer has allocated their limited income in such a way that the last dollar spent on each good provides the same marginal utility. In other words, the consumer has optimized their consumption choices to maximize their overall satisfaction by allocating their budget in a way that the marginal utility per dollar spent is equal across all goods.
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