consumer equilibrium in case of two commodity or Equi marginal utility
Question
Px=2, Py=3
Units- 1,2,3,4,5,6
MUx/Px- 10,9,8,7,6,5
MUy/Py- 8,7,6,5,4,3
In this data,
1) MUx/Px > MUy/Py
2) MUx/Px = MUy/Py
3) MUx/Px < MUy/Py
By data, all entries are like MUx/Px > MUy/Py I mean 10>8, 9>7, 8>6, 7>5, 6>4, 5>3. Then what about MUx/Px < MUy/Py and MUx/Px = MUy/Py?
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Answer ( 1 )
In case of two commodities, the Consumer’s Equilibrium is given in accordance with the Law of Equi-Marginal Utility. In the diagram, OO1 represents the total income of a consumer. … Thus, the consumer would increase his consumption of commodity X till the equality is achieved.