Question

a consumer consumes only two goods X and good Y and is the equilibrium price of goods expose so that it can lead to rise in demand for good​

Answer 1

Answer:

The consumer is in equilibrium when MUx / Px=MUy / Py. Given that Px falls, therefore, MUx /Px >MUy /Py. Now since, per rupee MU from consumption of X is higher than from Y, the consumer will transfer expenditure from Y to X. The consumer will buy more of X. In case of two commodities, consumer is said to be in equilibrium when: MUx/Px=MUy/Py when Px falls, MUx/Px > MUy/Py, implying that rupee worth of satisfaction is greater from X than Y. Accordingly, the consumer will start buying more of X commodity in place of Y commodity. When consumption of X increase, MUx must fall, while a cut in consumption of Y would mean a rise in MUy. Accordingly, MUx/Px will start falling while MUy/Py will start rising. The consumer will sop more of x commodity only when MUx/Px= MUy/Py. Briefly, when purchased Px falls, more of X commodity will be purchased in place