Advertisements
Advertisements
Questions
Explain the Law of Equi-Marginal Utility.
State the law of equi-marginal utility.
Advertisements
Solution
The law of equimarginal utility states that a consumer allocates his expenditure on various commodities in such a manner that the utility derived from each additional rupee spent on each of the commodities is equal. Algebraically, this is represented as the following equality.
`(MU_x)/(P_x) =(MU_y)/(P_y) = (MU_m)/(P_n) = ...MU_m`
In the above figure, OO1 represents the total income of a consumer. MUx and MUy represent the Marginal Utility curves of commodity x and commodity y, respectively. Point E represents the point of the consumer's equilibrium, where:
`(MU_x)/(P_x) = (MU_y)/(P_y) = MU_m`
At this point, OM amount of income is spent on commodity x and the remaining amount ofincome,e MO1 is spent on commodity y.
APPEARS IN
RELATED QUESTIONS
State whether the following statements are TRUE or FALSE:
Marginal utility increases with increase in consumption.
Choose the correct answer :
The capacity of a commodity to satisfy human want is known as _________.
Fill in the blanks with appropriate alternatives given in the bracket.
Marginal consumption function is always ________.
Fill in the blank with appropriate alternatives given below:
Marginal utility diminishes, as consumption of commodity ________.
Define the following concept:
Total utility
Explain the following concept:
Marginal utility
Give reason or explain:
Utility is a psychological term.
Give reason or explain:
Utility is ethically neutral.
Write short note on:
Equi-marginal utility
Answer the following question:
Explain the relationship between TU and MU.
State with reason whether you agree or disagree:
When MU is zero, TU diminishes.
Choose the correct answer from given options
When marginal utility is zero, total utility is
What is marginal utility (MU)?
What happens to marginal utility as more units of a good are consumed?
When does total utility reach its maximum point?
What is the consequence of continuing to consume after marginal utility becomes negative?
