Question

A consumer consumes two goods X and Y. What will happen if MUX/Px is greater than MUy/Py ?
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Answer 1

Answer:

consumer started to consume y good more to be in the equilibrium

Answer 2

Based on the notion of consumer equilibrium,if the ratio of marginal utility(MU) and price(P) of the good X is greater than that of good Y,then the consumer will purchase more of good X compared to good Y until both the ratios are equal.

Explanation:

• In this case,the ratio of MU and P for good X is higher than that of good Y implying that considering the per unit price of the goods,the additional satisfaction or utility obtained by any consumer from purchasing one more unit of good X is relatively higher than that of good Y.
• Hence,in this instance,the consumer is more satisfied by spending his or her expenditure or money on good X compared to good Y,which will encourage him or her to purchase more of good X compared to good Y.
• As the consumer purchases more of good X the marginal utility or the additional or incremental satisfaction or utility from purchasing one more unit of good X will fall increasingly and holding the per unit of price of good X constant or fixed,fall in the MU of good X will reduce the ratio of MU and P for good X.As a consequence,as the consumer continues his or her consumption of good X,eventually the ratio of MU and P for good X will decrease and will be equal to that of good Y,which is considered as the consumer equilibrium and the consumer satisfaction or utility is maximized at this point.