Question

In a situation when $MRS>P_X/P_Y$, the consumer would react by

• A. diminishing the consumption of commodity-X
• B. increasing the consumption of commodity-Y
• C. increasing the consumption of commodity-X
• D. none of these

Answer 1

The correct option is C increasing the consumption of commodity-X

MRS is the amount of Good-Y which a consumer is willing to give up for one unit more of Good-X. In a situation when $MRS>P_X/P_Y$, the consumer would react by increasing the consumption of commodity-X.