Economy, asked by meshramavi2173, 1 year ago

Explain consumer equilibrium in caee of single commodity,with the help of utility scheduled

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Answered by crystalrajput
0

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

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