Q2. When MUx /Px> MUy / Py: Consumption of Y rises while that of x falls. Consumption of X rises while that of Y falls. Consumption of both X and Y rises. o Consumption of both X and Y falls.
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B
increases
When consumer consumes two commodities, then equilibrium is achieved when consumer equates the ratio of marginal utility derived from one commodity in comparison to it's price with the ratio of the marginal utility of another commodity in comparison to it's price. So when the price of Y decreases it will increase the ratio of marginal utility of Y with it's price. Therefore, consumption of Y will be increased in order to decrease it's marginal utility to equate the ratio from with other commodity.
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