Question

On the consumption of $10$ units of a commodity, a consumer finds that $M{U}_X$ has exceeded the marginal utility of money. Should her reduce the consumption of $X$ so that he strikes an equilibrium. Give reason in support of your answer.

Answer 1

Given, $\frac{M{U}_X}{P_X}>M{U}_M$, when $10$ units of a commodity are consumed.
The consumer should not reduce but increase the consumption of $X$ in order to achieve the equilibrium.
At equilibrium point, $\frac{M{U}_X}{P_X}=M{U}_M$
In order to achieve equilibrium, $M{U}_X$ should reduce because price $\left(P_X\right)$ remains constant and $M{U}_M$ is also constant. This will happen only when consumption of commodity - $X$ is increased. Because due to law of diminishing marginal utility, as he increases the consumption of a commodity, the marginal utility derived from its successive units decreases.