Theory of consumer behaviour

A consumer with limited income chooses the bundle that gives the highest satisfaction. The ordinal approach draws this choice with indifference curves: each curve joins bundles the consumer likes equally, higher curves mean more satisfaction, and curves never cross. The budget line joins the bundles the consumer can afford. Equilibrium is where the budget line just touches the highest reachable indifference curve, and there the marginal rate of substitution equals the price ratio. Worked example: income 200, price of X 10 and price of Y 20, so the consumer can buy at most 20 units of X or 10 of Y, and the budget line joins those two points.