If the value of MUx/Px is more than MUy /Py, then the Consumer ________.

Will increase the Consumption of product X reduce product Y

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will reduce the consumption of product X and increase product Y

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Will consume more of product X and Y

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will consume less of product X and Y

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Solution

The correct option is B Will increase the Consumption of product X reduce product Y
If MUx / Px and MUy / Py are not equal and MUx / Px is greater than MUy / Py, then the consumer will substitute good 'x' for good 'y'. As a result the marginal utility of good 'x' will fall. The consumer will continue substituting good 'x' for good 'y' till MUx/Px = MUy/Py where the consumer will be in equilibrium. If the value of MUx/Px is more than MUy /Py, then the Consumer Will increase the Consumption of product X reduce product Y

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