Mr. Atal Singh is consuming two goods X and Y. If he is facing a situation of MUX/PX >MUY/PY, discuss how would he reach the level of equilibrium.
When Atal Singh is consuming two commodities and marginal utility derived from the good X is more than good Y. The equilibrium condition for the two commodities is MUX/PX = MUY/PY.
Therefore Atal will increase the consumption of good X until he reaches the optimum satisfaction level. And further consumption beyond the optimum level the marginal utility derived from the good X goes on diminishes, this is due to the diminishing marginal utility.
Then the marginal utility of the good X falls and consumption of good Y increases, then this will continue till MUY/PY = MUX/PX.
This is due to the law of diminishing marginal utility, where the utility of the consumer diminishes because of the successive consumption of the good without any interval.
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