Question

A consumer consumes only two goods X and Y whose prices are ₹ 3 and ₹ 4 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 4 and that of Y equal to 3, is the consumer in equilibrium, then the consumer will ______.

Options

• Buy more units of both, (X) and (Y)

• Buy more units of (Y) and less of (X)

• Buy more units of (X) and less of (Y)

• Buy less units of both, (X) and (Y)

Answer 1

A consumer consumes only two goods X and Y whose prices are ₹ 3 and ₹ 4 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 4 and that of Y equal to 3, is the consumer in equilibrium, then the consumer will buy more units of (X) and less of (Y).

Explanation:

`(MU_X)/P_X = 4/3`, while `(MU_Y)/P_Y = 3/4`, so the consumer gets more utility per rupee from X. The consumer should buy more X and less Y until the ratios are equal.