Given the price of a good, how will a consumer decide as to how much quantity of that good to buy? Use utility analysis.

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Solution

Given the price of a good, the consumer purchases that much of the commodity where the rupee worth of additional satisfaction $(\frac{M U_{X}}{P_{X}})$ from the consumption of a unit more of a good is equal to marginal utility of money $(M U_{M})$ for the consumer.

So, in a state of equilibrium, we have:

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

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Given the price of a good, how will a consumer decide as to how much quantity of that good to buy? Use utility analysis.

Given the price of a good, the consumer purchases that much of the commodity where the rupee worth of additional satisfaction (MUXPX) from the consumption of a unit more of a good is equal to marginal utility of money (MUM) for the consumer. So, in a state of equilibrium, we have: MUXPX=MUM