Question

As per the law of equi-marginal utility, the consumer's equilibrium will change if there is a change in:

1. His total expenditure

2. Marginal utility schedule of any good

3. Price of any good

• A. 1 but not 2 and 3
• B. 1 and 3
• C. 3 but not 1 and 2
• D. 1, 2 and 3

Answer 1

The correct option is D 1, 2 and 3

The consumer attains equilibrium if the price of the product is equal to the utility measured in units of money. So if there is change in total expenditure then consumer will increase or decrease his consumption which will affect his utility and therefore equilibrium; if the marginal utility schedule changes then the utility in terms of money increases or decreases which affects equilibrium and the price of the good will directly affect the equilibrium as it is measuring tape and we will try to adjust our utility accordingly.