Explain the law of equi-marginal utility.

OR

State and discuss the conditions of consumer’s equilibrium under the ordinal approach.

The law of equi marginal utility states that a consumer will get maximum satisfaction if the marginal utility of the last rupee spent on each good is the same.

the consumer will be in equilibrium in case of equi marginal utility will be MUx/Px = MUy/Py=MU of the last rupee spent on each good.

OR

The conditions of consumer’s equilibrium under the ordinal approach are:

MRS xy = Px/Py

MRSxy declines as more of Good X is consumed.

For example, If MRS XY > Px/Py, it implies that the consumer is willing to sacrifice more of Good X than the market price of Good X.It will induce a consumer to buy more Good X and less of Good Y.

If he purchases more of Good X, his MRSxy will reduce.

This will continue till MRS xy = Px/Py.