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Question

When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?
  1. A rupee spent on buying onions does not yield rupee worth of satisfaction
  2. Price increases without any increase in the income of the consumer
  3. The consumer has already reached equilibrium and is not willing to purchase additional onions
  4. The consumer shifts his priorities to more urgent needs


Solution

The correct option is A A rupee spent on buying onions does not yield rupee worth of satisfaction
A consumer buys a commodity only when a rupee spent on it yields rupee worth of satisfaction (MUM). A poor man stops the consumption of onion when he finds that a rupee spent on it does not yield rupee worth of satisfaction (no matter what quantity of onions is purchases), so that, Mux/PX<MuM.

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