a consumer consumes two goods X and Y . what will happen if MUX/Px is ...
Thn the consumer will increase the consumption of good X. This will decrease the marginal utility of good X and hence MUX/Px starts declining. The procss will be cntinue till MUx/Px becomes equl to MUy/Py and the consumer gains equilibrium.
a consumer consumes two goods X and Y . what will happen if MUX/Px is ...
Introduction:
When a consumer consumes two goods X and Y, the consumer's satisfaction depends on the marginal utility of each good. The marginal utility per unit price of a good is known as the marginal utility per dollar spent.
When MUX/Px is greater than MUy/Py:
When the marginal utility per unit price of good X is greater than the marginal utility per unit price of good Y, then the consumer will be willing to spend more on good X and less on good Y. This is because the consumer will get more satisfaction from spending money on good X than on good Y.
Explanation:
When MUX/Px is greater than MUy/Py, the consumer is getting more satisfaction per dollar spent on good X than on good Y. This means that the consumer will be willing to spend more money on good X than on good Y. As the consumer spends more money on good X, the marginal utility of good X will decrease, and the marginal utility per unit price of good X will decrease.
On the other hand, as the consumer spends less money on good Y, the marginal utility of good Y will increase, and the marginal utility per unit price of good Y will increase. This means that the consumer will be willing to spend less money on good Y.
Conclusion:
In conclusion, when MUX/Px is greater than MUy/Py, the consumer will be willing to spend more money on good X and less money on good Y. This is because the consumer is getting more satisfaction per dollar spent on good X than on good Y. As the consumer spends more money on good X, the marginal utility of good X will decrease, and the marginal utility per unit price of good X will decrease. As the consumer spends less money on good Y, the marginal utility of good Y will increase, and the marginal utility per unit price of good Y will increase.