Question

A consumer consumes only two goods explain the condition of consumer equilibrium using utility analysis

Answer 1

there are two comdition in two commodity case :-

• necessary condition

》Mux/Px= Muy/Py =Mum

where ,Mux = marginal utility of x

Muy = marginal utility of y

Px = price of x

Py = price of y mum = marginal utility of money

• sufficient condition

》PxQx + PyQy = M

where Px = price of x

Qx = quantity of x

Py = price of y

Qy = quantity of y

when both these condition are satisfied then the consumer will be at equilibrium.

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