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प्रश्न
A consumer consumes only two goods X and Y and is in equilibrium. Show that when the price of good X falls, demand for good X rises. Use Utility Analysis.
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उत्तर
Utility Analysis:
The consumer reaches equilibrium only if the following condition is satisfied
`"MU_x"/P_x = "MU"_Y/P_Y`
Give that the utility received from each additional unit of the money spent on both the goods should be equal. The marginal utility of the amount spent on good A is equal to the marginal utility of the amount spent on good B and also equal to the marginal utility of money.
`"MU"_X/P_X = "MU"_Y/P_Y = "MU"_m`
if the price of good B fall in relation to good A, the consumer will buy more of good B
`"MU"_Y/P_Y > "MU"_X/P_X = "MU"`
The consumption of good B will tend to increase till the equality is established between the marginal, utilities of both the goods become equal to the marginal utility of money.
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संबंधित प्रश्न
A consumer consumes only two goods X and Y and is in equilibrium. Show that when the price of good X rises, the consumer buys less of good X. Use utility analysis.
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Identify the correctly matched pair of column A to that of Column B:
| Column A | Column B |
| (1) Marginal Utility | (a) The power or capacity of a commodity to satisfy human wants. |
| (2) Cardinal measure of utility | (b) The addition to total utility on consuming an additional unit of a commodity. |
| (3) Total Utility | (c) It is the sum total of utility derived from the consumption of all units of a commodity. |
| (4) Utility | (d) It is that measurement of utility, which is measured in terms of units. |
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