Explain consumer equilibrium in caee of single commodity,with the help of utility scheduled
Answers
The law of D.M.V can be used to explain consumers equilibrium in case of a single commodity. Therefore, all the assumptions of Law of D.M.U are taken as assumptions of consumer's equilibrium in case of single commodity.
A consumer purchasing a single commodity will be at equilibrium, when he is buying such a quantity of that commodity which gives him maximum satisfaction. The number of units to be consumed of the given commodity by a consumer depends on 2 factors.
1. Price of the given commodity.
2. Expected utility from each successive unit.
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.
Consumer Equilibrium in case of Single Commodity.
Units of x Price (Px) Marginal Utility Marginal Utility in units Difference maximum
1 10 20 20 10
2 10 16 16 6
3 10 10 10 0
4 10 4 4 -6
5 10 0 0 -10
6 10 -6 -6 -16