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| 1. |
A consumer consumes only one good. The marginal utility from the good is 60 utils and its price is Rs 7 per unit. Indicate whether the consumer is at equilibrium or not if marginal utility of money for the consumer is 6 utils. What should he do to attain equilibrium ? |
| Answer» <html><body><p><<a href="https://interviewquestions.tuteehub.com/tag/p-588962" style="font-weight:bold;" target="_blank" title="Click to know more about P">P</a>></p><a href="https://interviewquestions.tuteehub.com/tag/solution-25781" style="font-weight:bold;" target="_blank" title="Click to know more about SOLUTION">SOLUTION</a> :A consumer in consumption of single commodity is at equilibrium when: <br/> `("Marginal Utility of Commodity " (MU_(X)))/("Marginal Utility of Money " (MU_(M)))` <br/> Given: `MU_(X) = 60 " utils, P_(X) = RS 7` per util, `MU_(M) = 6` utils. <br/> <a href="https://interviewquestions.tuteehub.com/tag/substituting-1231652" style="font-weight:bold;" target="_blank" title="Click to know more about SUBSTITUTING">SUBSTITUTING</a> values, we find that: `(60)/(6) gt 7` <br/> Therefore, consumer is not at equilibrium. As marginal utility is <a href="https://interviewquestions.tuteehub.com/tag/greater-476627" style="font-weight:bold;" target="_blank" title="Click to know more about GREATER">GREATER</a> than the price, consumer should <a href="https://interviewquestions.tuteehub.com/tag/increase-1040383" style="font-weight:bold;" target="_blank" title="Click to know more about INCREASE">INCREASE</a> the level of consumption.</body></html> | |