Derive the law of demand from single commodity equilibrium conditions. “Marginal utility =price”.
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Law of demand can be derived from the conept of consumer equilibrium in case of single commodity as follows.
we know that at equilibrium,
MUX = Price
Now, according to the law of dimishing marginal utility, the marginal utility derived from every additional unit of a good consumed tends to decline at the same price. Consequently, for each additional unit of the good, the consumer is willing to pay a lesser price. Thus, the consumer will increase his demand only when the price falls and vice-versa. .
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we know that at equilibrium,
MUX = Price
Now, according to the law of dimishing marginal utility, the marginal utility derived from every additional unit of a good consumed tends to decline at the same price. Consequently, for each additional unit of the good, the consumer is willing to pay a lesser price. Thus, the consumer will increase his demand only when the price falls and vice-versa. .
♡♡♡♡☜☆☞♡♡♡♡
◌⑅⃝●♡⋆♡LOVE♡⋆♡●⑅◌
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10
First, Law of Demand. It shows an inverse relationship between price and demand for a commodity i.e., when price rises, demand falls and vice versa.
Derivation by ‘Law of Marginal utility=Price’
It means that a consumer is at equilibrium when the satisfaction which he is deriving from consumption of a commodity is equal to the price paid for it i.e., MUx=Px.
Derivation by ‘Law of Marginal utility=Price’
It means that a consumer is at equilibrium when the satisfaction which he is deriving from consumption of a commodity is equal to the price paid for it i.e., MUx=Px.
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