Explain the conditions of consumer's equilibrium under utility analysi

1.	Explain the conditions of consumer's equilibrium under utility analysis.
Answer» The two conditions are : (i) The ratio of marginal utility to price is same in case of all the goods consumed. Suppose the consumer consumes only two goods x and y then MU_x/ P_x=MU_y/ P_y (ii) Marginal utility has a tendency to fall as more and more units are consumed.

Explain the conditions of consumer's equilibrium under utility analysis.

Answer»

The two conditions are :

(i) The ratio of marginal utility to price is same in case of all the goods consumed. Suppose the consumer consumes only two goods x and y then

MU_x/ P_x=MU_y/ P_y

(ii) Marginal utility has a tendency to fall as more and more units are consumed.