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# Summary

• The theory of consumerâ€™s behavior seeks to explain the determination of consumerâ€™s equilibrium. Two famous approaches to consumerâ€™s equilibrium are marginal utility analysis and indifference curve analysis.
• The law of diminishing marginal utility states that as a consumer increases the consumption of a commodity, every successive unit of the commodity gives lesser and lesser satisfaction to the consumer i.e., marginal utility of the commodity falls.
• The indifference curve theory which is an ordinal theory shows the householdâ€™s preference between alternative bundles of goods by means of indifference curves. A single curve joins all those combinations of goods which gives the household equal satisfaction or utility and between which the household is thus indifferent.
• The household reaches equilibrium when for a given money income and given market price, it has reached the highest attainable level of satisfaction. At such a point, the budget line is tangent to the indifference curve. At the tangency point, the following condition is satisfied: MUx/Px=Muy/ Py = Muz/Pz.