consider the following utility schedule. how many units of a commodity should a consumer consume to be in equilibrium if market price of the good is rs 3 per unit. explain with reason.
units consumed: 1 2 3 4 5 6 7 8
total utility: 10 18 24 28 31 33 33 29
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Answer:
Consumer attains equilibrium when:
P
x
MU
x
=MU of Money
or, when MU
x
=P
x
. MU of Money,
Substuting the given values, the consumer attains equlibrium when:
MU
x
=6×1=6.
Implying that the equilibrium is attained when 4 units of the commodity are purchased. (The table show that when MU
X
=6,4) units are purchased )
Therefore, the consumer should purchase 4 units in order maximum satisfaction.
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