A consumer consumes only two goods X and Y whose prices are Rs.5 and Rs.6 per unit respectively. If he chooses a combination of the two goods with MU of X = 35 and that of Y = 30, is the consumer in equilibrium ? Give reasons.
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But the condition of equilibrium is MUx/Px=MUy/Py The consumer is not in equilibrium. The consumer would react to this situation by increasing the consumption of Y in place of X, because of rupee worth of satisfaction in case of Y (MUx/Px) is greater than in case of X(MUx/Px). As consumption of X is reduced. MUx would start rising. Likewise, increase in the consumption of Y would cause a fall in MUy. The process of substituting Y for X would continue till MUx/Px= MUy/Py, when the consumer maximizes his satisfaction
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