A consumer consumes only two goods X and Y whose prices are Rs. 2 and Rs. 1 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X being 4 and that of Y being 4, is the consumer in equilibrium? Give reasons. Explain what a rational consumer would do in this situation. Use marginal utility analysis.

Open in App

Solution

Given, $P_{X} = R s . 2$ $P_{Y} = R s . 1$ ; $M U_{X} = 4$ ; $M U_{Y} = 4$

The consumer attains equilibrium when

$\frac{M U_{X}}{P_{X}} = \frac{M U_{Y}}{P_{Y}}$

In the given question, the consumer is not in the equilibrium because here,

$\frac{M U_{X}}{P_{X}} < \frac{M U_{Y}}{P_{Y}}$

Using the given values, $\frac{4}{2} < \frac{4}{1}$

The consumer would react to this situation by increasing the consumption of good Y in place of good X. This will reduce marginal utility of Y and increase marginal utility of X.

Suggest Corrections

Similar questions

Q. A comsumer consumes only two goods

X

and

Y

whose prices are Rs. 2 and Rs. 1 per unit respectively. It the consumer chooses a combination of the two goods with marginal utility of

X

being

4

and that of

Y

also being

4

, is the consumer in equilibrium? Give reasons. Explain what will a rational consumer do in this situation. Use Marginal Utility Analysis.

A consumer consumes only two goods X and Y whose prices are Rs. 4 and Rs. 5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Use utility analysis.

A consumer consumes only two goods X and Y, both priced at Rs. 2 per unit. If the consumer chooses a combination of the two goods with marginal rate of substitution equal to 2, is the consumer in equilibrium? Why, or why not? What will a rational consumer do in this situation? Explain.

Q. A consumer consumes only two goods

X

and

Y

. Marginal utilities of

X

and

Y

are

5

and

4

respectively. The prices of

X

and

Y

are

R s . 4

per unit and

R s . 5

per unit respectively. Is the consumer in equilibrium? What will be the further reaction of the consumer?

A consumer consumes only two goods, each priced at Rupee one per unit. If the consumer chooses a combination of the two goods with marginal rate of substitution equal to 2, is the consumer at equilibrium? Give reasons. Explain what a rational consumer would do in this situation.

Join BYJU'S Learning Program