a consumer consumes only two goods X and Y is in equilibrium price of X falls . explain thae relation of consumer though utility anylysis
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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. ... Accordingly, the consumer will start buying more of X commodity in place of Y commodity.
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