Starting from the initial situation of consumer's equilibrium, suppose that the marginal utility of a rupee increase. Will it increase or decrease the quantity demanded of a product?

Open in App

Solution

Consumer's equilibrium is struck when:
MUXPX=MUM
A rise in MUM implies that MUXPX<MUM.
If PX
is constant, MUX must rise for the equilibrium to be resorted. MUX will rise only if quantity demand of X decreases (in accordance with the law of diminishing marginal utility).

Suggest Corrections

Similar questions

B. The law of diminishing marginal utility states that as the stock of a commodity decreases with the consumer, its marginal utility to the consumer decreases.

Join BYJU'S Learning Program

Starting from the initial situation of consumer's equilibrium, suppose that the marginal utility of a rupee increase. Will it increase or decrease the quantity demanded of a product?

Consumer's equilibrium is struck when:MUXPX=MUMA rise in MUM implies that MUXPX<MUM.If PX is constant, MUX must rise for the equilibrium to be resorted. MUX will rise only if quantity demand of X decreases (in accordance with the law of diminishing marginal utility).

Consumer's equilibrium is struck when:
MUXPX=MUM
A rise in MUM implies that MUXPX<MUM.
If PX
is constant, MUX must rise for the equilibrium to be resorted. MUX will rise only if quantity demand of X decreases (in accordance with the law of diminishing marginal utility).