How a consumer can attain equilibrium in such a situation is an important question that arises at th

How a consumer can attain equilibrium in such a situation is an important question that arises at th

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How a consumer can attain equilibrium in such a situation is an important question that arises at this point? Even here in the case of multiple goods, the marginal utility principle remains applicable but in a different form. It is called the equimarginal utility principle . What the consumer now attempts is to equate the marginal utility of various goods that he intends to purchase. Since the goods have different prices, the consumer has to equate the ratios of marginal utility and price of all the goods that he desires to purchase. If X, Y, Z etc. are the goods and Px, Py, Pz etc. are their prices respectively then the equilibrium rule can be stated as, This can be illustrated with the help of a simple example of two goods. Let X and Y be the goods a consumer wants to consume. Their prices are Px = $4 and Py = $2 respectively. The consumer’s allowance or budget is $10. He must spend the entire income so as to maximize his satisfaction from the two goods. His marginal utilities for
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How a consumer can attain equilibrium in such a situation is an important question that arises at th

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