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Question
Define Budget Set And Marginal Utility Analysis.
Define Budget Set And Marginal Utility Analysis.
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Solution
A budget set is the collection of all bundles of goods that a consumer can buy with his income at the prevailing market prices.
Marginal utility (MU) refers to changes in total utility due to the consumption of one additional unit of a commodity. For example, suppose 4 bananas give us 28 units of total utility and 5 bananas give us 30 units of total utility.
A budget set is the collection of all bundles of goods that a consumer can buy with his income at the prevailing market prices.
Marginal utility (MU) refers to changes in total utility due to the consumption of one additional unit of a commodity. For example, suppose 4 bananas give us 28 units of total utility and 5 bananas give us 30 units of total utility.
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