A consumer consumes only two goods X and Ywhose prices are Rs. 4 and Rs. 5 per unit respectiveely. Ifthe consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4 , isthe consumer in equilibrium ? Given reasons . What will a rational consumer do in this situation ? Use utility analysis.

A consumer consumes only two goods X and Ywhose prices are Rs. 4 and R

1.	A consumer consumes only two goods X and Ywhose prices are Rs. 4 and Rs. 5 per unit respectiveely. Ifthe consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4 , isthe consumer in equilibrium ? Given reasons . What will a rational consumer do in this situation ? Use utility analysis.
Answer» SOLUTION :GIVEN `P_(x)=4,P_(y)=5and MU_(x)=5,MU_(y)=4` , a consumer will be in equilibrium when : `(MU_(x))/(P_(x))=(MU_(y))/(P_(y))` Substituting values , we find that `(5)/(4)gt(4)/(5)" Or " (MU_(x))/(P_(x))gt(MU_(y))/(P_(y))` Since PER RUPESS `MU_(x)`is higher than per rupee `MU_(y)` , consumer is not in equilibrium.Theconsumer will continue till`(MU_(x))/(P_(x))and(MU_(y))/(P_(y))`AREEQUAL and consumer is in equilibrium.