Question

$\huge{\fbox{\fbox{\bigstar{\mathfrak{\red{Question}}}}}}$

sachin the given consumer consumes only two goods X and Y whose price are rupee2 and rupee1 per unit respectively if he chooses a combination of the two good with marginal utilitiy of X being 4 and that of Y also being 4 is the given consumer equilibrium? Give reason!!

No spam!! ​

Answer 1

Explanation:

MUx/Px=4/2

MUy/Py=4/1

MUx/Px=MUy/Py

which is not true in this case,i.e, the consumer is not in equilibrium

As MUy/Py>MUx/Px  , a Rational consumer will buy more of y commodity and less of x commodity. MUy will fall and MUx will rise (in accordance to law of diminishing marginal utility. This will continue till MUy/Py=MUX/Px,i.e, the consumer reaches equilibrium.

Answer 2

Answer:

$\huge{\fbox{\fbox{\bigstar{\mathfrak{\pink{answer}}}}}}</p><p>$

According to the utility approach, a consumer reahes equilibrium where the following equality is met.

$\frac{ mu_{x} }{p_{x}} = \frac{ mu_{ y} }{ p_{y} }$

According to the given question

$= > \frac{ mu_{x} }{p_{x}} = \frac{4}{2} \\ = > \frac{ mu_{ y} }{ p_{y} } = \frac{1}{1} \\ so \: \: . \frac{ mu_{y} }{p_{y}} \:is \: greater \: than\frac{ mu_{x} }{p_{x}} \:$

$\huge{\fbox{\fbox{\bigstar{\mathfrak{\pink{thus}}}}}}</h3><h3>$

thus,

to reach the equilibrium,a rational cosumer would increase the ,

$\frac{ p_{y}}{ p_{x} } \: of \: good \: x.$