Theory of consumer behaviour — Economics STD 11 Commerce — Question
CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour3 Marks
Question
Explain the conditions of consumer's equilibrium under utility analysis.
✓
Answer
Conditions of consumer's equilibrium using utility approach are as follows:
In case of a single commodity:
$\frac{\text{MU}_\text{X}}{\text{P}_\text{X}}=\text{MU}_\text{M}$
Or $\text{MU}_\text{X}=\text{P}_\text{X}$
$[\text{when }\text{MU}_\text{M}=1]$
In case of two commodities:
$\frac{\text{MU}_\text{X}}{\text{P}_\text{X}}=\frac{\text{MU}_\text{Y}}{\text{P}_\text{Y}}=\text{MU}_\text{M}$
Or $MU_X= MU_Y$_ [when $MU_M= 1$ and $P_X = P_Y = 1]$
Where,
$MU_X =$ Marginal Utility of commodity
$MU_Y =$ Marginal Utility of commodity Y
$P_X =$ Price of commodity X
$P_Y =$ Price of commodity Y
$MU_M =$ Marginal Utility of money Assumptions:
Marginal Utility of money and price of commodities remain constant.
Law of Diminishing Marginal Utility must hold true, implying that Marginal Utility must decline as more of a commodity is consumed.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.