Question

Navya consumes pizza and coke and find her equilibrium as the prize of coke rises explain the reaction of consumer

Answer 1

Answer:

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Answer 2

Answer:

• When the prize of coke rises, she would consume less of coke because the law of demand is directly proportional to the quantity.
• A consumer’s equilibrium depends on the principle of ‘equi-marginal utility’.
• According to this, a consumer is given two goods to spend; he/she will divide his/her income equally between the two goods.
• However, if the price of one item increases, then the same consumer will reduce the intake of the good of which the price has increased.
• According to the “principle of equi-marginal utility”, “the marginal utility” of money spent on a good will be equal to the marginal utility of the total goods divided by the price paid for the goods.