Question

Using the utility approach, discuss how a consumer attains equilibrium?

Answer 1

If a consumer spends his available income on products X and Y in a way that maximises his level of enjoyment, he will achieve equilibrium. If he only purchases the amount of each product that provides him with the same utility as the last rupee spent on each commodity, he will be most satisfied.

In other words, `(M.U.x)/(px)` and `(M.U.y)/(Py)` must be equal

If `(M.U.x)/(Px)` is not equal to `(M.U.y)/(Py)` then the consumer is not in equilibrium.