Q6 of 30 Page 1

A consumer consumes only two goods X and Y. Marginal utilities of X and Y is 5 and 4 respectively. The prices of X and Y are Rs 4 per unit and Rs 5 per unit respectively. Is the consumer in equilibrium? What will be the further reaction of the consumer? Explain.

A consumer attains equilibrium in case of two goods when

MUx _ MUy


Px. Py


According to given question,


MUx _ 5 _ 1.25


Px. 4


MUy _ 4 _ 0.8


Py. 5


As MUy is lesser than MUx ,


Py. Px


Therefore, the consumer if not in equilibrium, will decrease the consumption of good y and increase the consumption of good x to achieve it.


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