Question

A consumer consumes only two goods X and Y state and example condition of consumer equilibrium with the help of utility analysis

Answer 1

Answer:

Heya your answer goes like this

Assuming that only two goods the consumer consumes are X and Y, the conditions of equilibrium are: (i) MUx/Px= MUy/Py =MUm (ii) MU falls as more is consumed. (a) Suppose MUx/Px> MUy/Py.

The consumer will not be in equilibrium because per rupee MU of X is greater than per rupee MU of Y. This will include the consumer to buy more of X by reducing expenditure on Y. It will lead to fall in MUx and rise in MUy. This will continue till MUx/Px=MUy/Py. (b) Unless MU falls as more of a good is consumed the consumer will not reach equilibrium.

Hope it helps! :)