Let price of a commodity X be 10. Marginal utility (in terms of money) for 5 units is given as
Units
1
2
3
4
5
MUx (rs)
16
10
4
2
1
How many units should a consumer purchase, so that his satisfaction is maximum ?
Answers
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.
Explanation:
Given below is the utility schedule of a consumer for commodity-X. The price of the commodity is Rs. 6 per unit. How many units should the consumer purchase to maximise satisfaction? (Assume that utility is expressed in units and 1 util = Rs. 1). Give reasons for your answer.
Consumption
(Units) Total Utility
(Utils) Marginal Utility
(Utils)
1 10 10
2 18 8
3 25 7
4 31 6
5 34 3
6 34 0