How is equilibrium achieved with the help of indifference curve analysis?

Indifference analysis is an alternative way of explaining consumer choice that does not require an explicit discussion of utility.

Indifferent: the consumer has no preference among the choices.

Indifference curve: a curve showing all the combinations of two goods (or classes of goods) that the consumer is indifferent among. We need to draw indifference map and the budget line to explain the consumer’s equilibrium.

Its Conditions:

There are three conditions for consumer’s equilibrium:

(1)   The Budget line should be Tangent to the Indifference Curve.

(2)   At the point of Equilibrium the Slope of the Indifference Curve and of the Budget Line should be the same.

(3)   Indifference curve should be Convex to the Origin.