Explain the condition of consumer's equilibrium in case of two co… - Vidyadip

Question

Explain the condition of consumer's equilibrium in case of two commodities.

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Answer

In case of two commodities, the consumer will be in equilibrium when following condition is satisfied:$\frac{\text{MU}_\text{X}}{\text{P}_\text{X}}=\frac{\text{MU}_\text{Y}}{\text{P}_\text{Y}}=\text{MU}_\text{M}.$
Where, $MU_X$ and $MU_Y$ = Marginal Utilities of commodities $X$ and $Y$, respectively $MU_M$ = Marginal Utility of money $P_X$ and $P_y$ = Prices of commodities $X$ and $Y$, respectively

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