Question

(a) On the consumption of the 11th unit of a commodity, a consumer finds that
TU To is the same as TU,
Calculate MU and highlight the satisfaction derived
from the the 11unit.
(b) A consumer has Rs.70 with him. Market price of good X and good Y is Rs 10
and Re5 per unit each respectively, Highlight all the combinations that fulfill
the conditions of consumer's equilibrium and determine the optimal
combination of X and Y that he would purchase to attain equilibrium and why?

Answer 1

Explanation:

Given,

P

X

MU

X

>MU

M

when 10 units of the commodity are consumed.

The consumer should not reduce, rather increase the consumption the consumption of commodity X in order to achieve equilibrium. Only when the consumption of X is increased that MU

X

will reduce, so that

P

X

MU

X

becomes equal to MU

M

.