Marginal Rate of Substitution ( MRSxycap M cap R cap S sub x y end-sub ) equals Price Ratio (

| Approach | Condition | Meaning | | :--- | :--- | :--- | | | $MU_x = P_x$ | Marginal Utility equals Price. | | Two Commodity (Cardinal) | $\fracMU_xP_x = \fracMU_yP_y = MU_m$ | Marginal Utility per rupee is equal across all goods. | | Indifference Curve (Ordinal) | $MRS_xy = \fracP_xP_y$ | Slope of Indifference Curve equals Slope of Budget Line. |

The MRS must be diminishing at the point of equilibrium, meaning the indifference curve must be convex to the origin. 6. Summary Comparison Cardinal Approach Ordinal Approach Measurement Quantifiable (Utils) Qualitative (Rankings) Key Tool Law of Equi-Marginal Utility Indifference Curve & Budget Line Equilibrium Condition

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Convex to the origin (due to diminishing Marginal Rate of Substitution). Higher IC represents higher satisfaction.

The sum total of satisfaction derived from consuming all units of a commodity.

The slope of the Indifference Curve must equal the slope of the Budget Line.

Consumer Equilibrium Class 11 Notes: Free Comprehensive Guide

Total satisfaction derived from consuming all possible units of a commodity.

Explain the difference between the approaches in more detail?