Question

A consumer consumes only two goods X and Y. IF MU of X and
Y are 10 and 5 respectively and if price of X is Rs 5 per unit and
that of Y is Rs 2 per unit, is the consumer in equilibrium? What will
be the further reaction of the consumer? Explain​

Answer 1

Answer:

MUx/Px = MUy/Py

10/5 = 5/2

2 < 2.5

So Consumer is not is at Equilibrium point because Given Condition is not Satisfying.

Since MUx/Px < MUy/Py

A rational consumer will increase the Consumption of Good Y because He is getting More Satisfaction in consuming Good Y.

According to MRS,

After Increasing Consumption of Good Y, The Consumer will be restored to Equilibrium Point.