Question

A consumer consumes only two goods. Explain the condition of consumer?
equilibrium using marginal utility analysis

Answer 1

Answer:

MUx/Px = MUy/Py is Equilibrium Point For consumer In Two Commodity Case Using Cardinal Approach.

If the Condition is not satisfied,

There Might be 2 CASES:

1. Mux/Px > MUy/Py

In the above Situation, The consumer will increase the Consumption of Good X To get Restored To Equilibrium Point (According to DMU)

2. MUx/Px< Muy/Py

In the above Situation, The consumer will increase the Consumption of Good Y To get Restored To Equilibrium Point. (According to DMU)