Consumer Equilibrium One Commodity Case

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Consumer Equilibrium One Commodity Case :-

Consumer Equilibrium One Commodity Case (say commodity x) exists, at the point when Marginal utility of the commodity (MUx) is equal to price paid (Px) for the commodity.

  • Consumer Equilibrium One Commodity Case – Marginal utility of the commodity Mux > Price Paid (Px) –  

This means that the benefit obtained by consumer on additional unit purchase (Mux ) is greater than the price paid for commodity and consumer will keep buying additional units of goods. As consumer keeps buying additional units of goods, MU will fall due to the operation of the law of diminishing marginal utility. When Mu is equal to price, the consumer gets maximum benefits , and is in a state of equilibrium.

 

  • Consumer Equilibrium One Commodity Case – Marginal utility of the commodity Mux < Price Paid (Px)

This means that the benefit obtained by consumer on additional unit purchase (Mux ) is less than the price paid for commodity . The consumer will keep reducing the consumption of commodity ‘x, until his Marginal Utility is equal to price.

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