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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» <html><body><p></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 href="https://interviewquestions.tuteehub.com/tag/given-473447" style="font-weight:bold;" target="_blank" title="Click to know more about GIVEN">GIVEN</a> `P_(x)=4,P_(y)=5and MU_(x)=5,MU_(y)=4` , a consumer will be in equilibrium when :<br/>`(MU_(x))/(P_(x))=(MU_(y))/(P_(y))`<br/>Substituting values , we find that<br/>`(5)/(4)gt(4)/(5)" Or " (MU_(x))/(P_(x))gt(MU_(y))/(P_(y))`<br/>Since <a href="https://interviewquestions.tuteehub.com/tag/per-590802" style="font-weight:bold;" target="_blank" title="Click to know more about PER">PER</a> <a href="https://interviewquestions.tuteehub.com/tag/rupess-3000947" style="font-weight:bold;" target="_blank" title="Click to know more about RUPESS">RUPESS</a> `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))`<a href="https://interviewquestions.tuteehub.com/tag/areequal-1963396" style="font-weight:bold;" target="_blank" title="Click to know more about AREEQUAL">AREEQUAL</a> and consumer is in equilibrium.</body></html>


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