A consumer consumes only two goods A and B and is in equilicbrium . Price of good a falls . Show that it will lead to rise in dmand for good A . UseUtility Analysis.

A consumer consumes only two goods A and B and is in equilicbrium . Pr

1.	A consumer consumes only two goods A and B and is in equilicbrium . Price of good a falls . Show that it will lead to rise in dmand for good A . UseUtility Analysis.
Answer» <P> Solution :When consumer is in EQUILIBRIUM : `(MU_(A))/(P_(A))=(MU_(B))/(P_B)` When price of good A`(P_(A))` FALLS , then `(MU_(A))/(P_(A))gt(MU_(B))/(P_B)` Since per rupee marginal utility of A `(MU_(A))` is now higher than per rupee `MU_(B)` , the consumer will divert expenditure from good B to good A. This raises demand for good A.