Mr. X consumes two commodities A and B whose prices are Rs. 6 and Rs. 8 per unit respectively. Does the Mr. X strikes his equilibrium when he is getting marginal utility of A equal to 7 and that of B also equal to 7?

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Solution

We know that, Mr.X strikes his equilibrium when:
$\frac{M U_{A}}{P_{A}} = \frac{M U_{B}}{P_{B}}$

$\frac{M U_{A}}{P_{A}} = \frac{7}{6}$

and $\frac{M U_{B}}{P_{B}} = \frac{7}{8}$

Here, $\frac{7}{6} > \frac{7}{8}$ or $\frac{M U_{A}}{P_{A}} \neq \frac{M U_{B}}{P_{B}}$ .
Therefore, Mr. X does not strike his equlibrium.

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