A consumer consumes goods $X$ and $Y$ . Given below is his marginal utility schedule for goods $X$ and $Y$ . Suppose, the price of $X$ is $R s .2$ , $Y$ is $R s .1$ and income $R s .12$ . State the law of Equimarginal utility and explain how the consumer will attain equilibrium.
Units 1 2 3 4 5 6
$M U_{X}$ 16 14 12 10 8 6
$M U_{Y}$ 11 10 9 8 7 6

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Solution

The law of equi-marginal utility states that the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spent on each good is equal.
The equilibrium condition is satisfied when the consumer consumes the goods in the combination of 1 unit of Good X and 4 units of Good Y. At this level of consumption, the total expenditure of the consumer is :(1 × ` 2) + (4 × ` 1) = 2 + 4 = 6This is attainable also in his given income of Rs 12.

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