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Given below i...

Question

Given below is the utility schedule of a consumer for commodity-X. The price of the commodity is Rs. 6 per unit. How many units should the consumer purchase to maximise satisfaction? (Assume that utility is expressed in units and 1 util = Rs. 1). Give reasons for your answer.
Consumption
(Units) Total Utility
(Utils) Marginal Utility
(Utils)
1 10 10
2 18 8
3 25 7
4 31 6
5 34 3
6 34 0

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Solution

Consumer attains equilibrium when:
$\frac{M U_{x}}{P_{x}} = M U$ of Money
or, when $M U_{x} = P_{x}$ . MU of Money,
Substuting the given values, the consumer attains equlibrium when:
$M U_{x} = 6 \times 1 = 6$ .
Implying that the equilibrium is attained when 4 units of the commodity are purchased. (The table show that when $M U_{X} = 6, 4)$ units are purchased )
Therefore, the consumer should purchase 4 units in order maximum satisfaction.

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