This lesson discusses the second order conditions for the consumer’s equilibrium. It is beneficial for the graduation students, post graduation students, aspirants of NET JRF economics, CUET Economics aspirants.

The tangency of Budget Line to Indifference Curve is a necessary condition to attain consumer’s equilibrium but not sufficient condition. The second order condition also needs to be fulfilled, that is the Indifference curve at the tangency should be convex to origin.

Thus, the following 2 conditions are required for consumer’s equilibrium:

The Budget Line must be tangent to the Indifference Curve, that is the Slope of the Budget Line should be equal to the slope of the Indifference Curve.
Indifference curve must be convex to origin at the point of tangency, that is, the Marginal Rate of Substitution must be on the falling part.

The Consumer’s equilibrium is entirely in terms of the consumer's relative preferences of the various combinations of 2 goods. It makes no use of the cardinal concept.

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