8. The economic value of the given
equation, MUx/Px=MUm when x happens to
be a domestic fuel(LPG) and Px is lowerd
by way of subsidy by the government.
(Evaluation based) *
(1 Point
MUX/Px < MUm
MUX/Px > MUM
MUy/Py < MUY
MUy/Py > MUY
Answers
Explanation:
Taking MUM as constant, a fall in PX (by way of subsidy) would mean that MUXPX>MUM. The consumer's equilibrium is disturbed. But the change is good for the consumer. Induced by lower PX, the consumer increase the consumption of LPG. A rise in the consumption of LPG leads to a fall in MUX. The equilibrium (MUXPX=MUM) is now established at a higher level of consumption of LPG.
The subsidy plays its role by increasing the consumption of LPG, as desired by the government Consumer's equilibrium is shifted to a higher level of satisfaction, even when his income remains constant.
Answer:
Taking MUM as constant, a fall in PX (by way of subsidy) would mean that MUXPX>MUM. The consumer's equilibrium is disturbed. But the change is good for the consumer. Induced by lower PX, the consumer increase the consumption of LPG. A rise in the consumption of LPG leads to a fall in MUX. The equilibrium (MUXPX=MUM) is now established at a higher level of consumption of LPG.
The subsidy plays its role by increasing the consumption of LPG, as desired by the government Consumer's equilibrium is shifted to a higher level of satisfaction, even when his income remains constant.
Explanation:
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