Substitution - smaller than that of the second. I n this...

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Substitution With every increase in the units of good X consumed, the marginal utility for good X (Mux) will start falling. And with every decrease in the good Y consumed (Muy) will start rising. Continue the process until the two ratios are equated. If price of X remains constant but that of Y falls then the value of the first ratio will be
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Unformatted text preview: smaller than that of the second. I n this case an increase in the consumption of Y and a decrease in the consumption of X will help to reestablish the equilibrium. This principle of substitution is the basis of consumer equilibrium ....
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This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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