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When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?
  • a)
    A rupee spent on buying onions does not yield rupee worth of satisfaction
  • b)
    Price increases without any increase in the income of the consumer
  • c)
    The consumer has already reached equilibrium and is not willing to purchase additional onions
  • d)
    The consumer shifts his priorities to more urgent needs
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
When onion price hits hard, the poor man simply stops buying it. Which...
A consumer buys a commodity only when a rupee spent on it yields rupee worth of satisfaction (MUM). A poor man stops the consumption of onion when he finds that a rupee spent on it does not yield rupee worth of satisfaction (no matter what quantity of onions is purchases), so that, Mux/PX<MuM.
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When onion price hits hard, the poor man simply stops buying it. Which...
Explanation:

The correct explanation for the poor man stopping to buy onions when the price hits hard is option 'A': A rupee spent on buying onions does not yield rupee worth of satisfaction. Let's delve into the details to understand why this is the correct explanation.

Economic concept of marginal utility:
The concept of marginal utility helps us understand the relationship between the price of a good and the satisfaction or utility derived from consuming it. According to this concept, the first unit of a good consumed provides the highest level of satisfaction, but as more units are consumed, the additional satisfaction derived from each additional unit decreases.

Diminishing marginal utility:
The principle of diminishing marginal utility states that as more of a good is consumed, the marginal utility derived from each additional unit decreases. In the case of onions, this implies that the first few onions consumed provide a high level of satisfaction, but as more onions are consumed, the additional satisfaction from each additional onion decreases.

Price and satisfaction:
When the price of onions increases, the poor man realizes that the marginal utility he derives from consuming onions is not worth the additional cost. In other words, the satisfaction he gets from each additional onion is less than the rupee he spends on buying it.

Opportunity cost and shifting priorities:
The poor man, being financially constrained, has limited resources to allocate towards his needs. When the price of onions rises, he realizes that he can allocate his limited resources towards other more urgent needs that provide greater satisfaction or utility per rupee spent. This leads to a shift in his priorities from buying onions to meeting other essential needs.

Equilibrium:
Option 'C' suggests that the consumer has already reached equilibrium and is not willing to purchase additional onions. However, this explanation does not take into account the impact of price on the consumer's decision. Equilibrium refers to a situation where the consumer is maximizing his satisfaction given his budget constraint and the prices of goods. When the price of onions rises, the consumer's equilibrium position is disturbed, leading to a change in his consumption pattern.

In conclusion, the correct explanation for the poor man stopping to buy onions when the price hits hard is that a rupee spent on buying onions does not yield rupee worth of satisfaction. The concept of marginal utility helps us understand this relationship, as the satisfaction derived from each additional onion decreases, making it less desirable for the consumer to spend his limited resources on buying onions.
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When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?a)A rupee spent on buying onions does not yield rupee worth of satisfactionb)Price increases without any increase in the income of the consumerc)The consumer has already reached equilibrium and is not willing to purchase additional onionsd)The consumer shifts his priorities to more urgent needsCorrect answer is option 'A'. Can you explain this answer?
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When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?a)A rupee spent on buying onions does not yield rupee worth of satisfactionb)Price increases without any increase in the income of the consumerc)The consumer has already reached equilibrium and is not willing to purchase additional onionsd)The consumer shifts his priorities to more urgent needsCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?a)A rupee spent on buying onions does not yield rupee worth of satisfactionb)Price increases without any increase in the income of the consumerc)The consumer has already reached equilibrium and is not willing to purchase additional onionsd)The consumer shifts his priorities to more urgent needsCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?a)A rupee spent on buying onions does not yield rupee worth of satisfactionb)Price increases without any increase in the income of the consumerc)The consumer has already reached equilibrium and is not willing to purchase additional onionsd)The consumer shifts his priorities to more urgent needsCorrect answer is option 'A'. Can you explain this answer?.
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