Question

State whether true or false:

When `P_x \cancel= P_y`, then consumer is at equilibrium when MU_x = MU_y.

Answer 1

This statement is false.

Reason:

When prices of two goods are unequal (\(P_X \neq P_Y\)), the consumer is in equilibrium when:

\[ \frac{MU_X}{P_X}=\frac{MU_Y}{P_Y} \]

Thus, equilibrium depends on marginal utility per rupee spent, not on equal marginal utilities.