_______ states that consumer distributes his expenditure between different goods in such a way that the marginal utility derived from the last rupee spent on each good is the same.
_______ states that consumer distributes his expenditure between different goods in such a way that the marginal utility derived from the last rupee spent on each good is the same.
The correct option is D The law of equi-marginal utility
The law of equi-marginal utility is
based on the law of diminishing marginal utility. The equi-marginal principle states that a consumer will be maximizing his
total utility when he
allocates his fixed money income in such a way that the utility derived from the last
unit of money spent on each good is equal.
A rational consumer
substitutes some units of the commodity of greater utility to some units of the
commodity of less utility. The result of this substitution will be that the
marginal utility of the former (commodity with greater utility) will fall and
that of the latter will rise, till the two marginal utilities are equalized.
The law of equi-marginal utility is based on the law of diminishing marginal utility. The equi-marginal principle states that a consumer will be maximizing his total utility when he allocates his fixed money income in such a way that the utility derived from the last unit of money spent on each good is equal.
A rational consumer substitutes some units of the commodity of greater utility to some units of the commodity of less utility. The result of this substitution will be that the marginal utility of the former (commodity with greater utility) will fall and that of the latter will rise, till the two marginal utilities are equalized.
