Question

"The law states that a consumer will so allocate his expenditure so that the utility gained from the last rupee spent on each commodity is equal." Identify the law defined above.

Options

• Law of diminishing marginal utility

• Law of substitution

• Law of equi-marginal utility

• None of the above

Answer 1

Law of equi-marginal utility

Explanation:

A consumer buys each item until the MU per rupee spent on it equals the MU per rupee spent on another. While this requirement is met, a client cannot shift a single rupee from one commodity to another and increase his utility. The law of equi-marginal utility is what we're talking about here.