Question

Explain clearly consumer's equilibrium in case of (1) single commodity and (ii) two commodities
with the help of cardinal utility approach​

Answer 1

Answer:

1) The law of D.M.V can be used to explain consumers equilibrium in case of a single commodity. ... To determine the equilibrium point, consumer compare the price of the given commodity with its utility. Being a rational consumer, he will be at equilibrium when marginal utility is equal to price paid for the commodity.

ii)Consumer Equilibrium in Case of a Two Commodity, With the Help of Utility Analysis. Suppose, a consumer consumes only two goods X and Y. He will attain equilibrium only if he allocates his given income on the purchase of good X and Y in such a way that per rupee MU of both the products is equal and he gets maximum TU.