Question

when does law of equi-marginal utility is known as law of substitution?

Answer 1

In the advent of unlimited wants of human beings, the choice needs to be made from the range of goods available. In this process of making choice, the good having higher utility attached with it is chosen over the good having lower utility. With continous substitution of one good over the other results in fall in the utility derived from the former while that of latter good rises. Subsequently, the utility derived from spending the last rupee on both the goods become equal. Thus, under such situation, the law of equi-marginal utility is also known as law of substitution.