# A Consumer Consumes Only Two Goods X and Y. Marginal Rate of Substitution is 3 and per Unit Prices of X and Y is Rs 4 and Rs 2 Respectively. is the Consumer in Equilibrium? What Will Be the Further Reaction of the Consumer? Give Reasons - Economics

A consumer consumes only two goods X and Y. Marginal rate of substitution is 3 and per unit prices of X and Y is Rs 4 and Rs 2 respectively. Is the consumer in equilibrium? What will be the further reaction of the consumer? Give reasons

#### Solution

The consumer reaches equilibrium point only when the following condition is satified

MRS=P_x/P_y

Given that

MRS = 3

P_x/P_y=4/2=2

As MRS is greater than the price ratio, the rational consumer would try to satisfy the condition by increasing the consumption of Good-X and forego the consumption of Good-Y.

Concept: Marginal Rate of Substitution (MRS)
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