CBSE Class 12-commerce Answered
A consumer consumes only two goods, each priced at Rs 2 per unit. If the consumer chooses a combination of the two goods with Marginal Rate of Substitution equal to 2, is the consumer in equilibrium? Why or Why not? What will a rational consumer do in this situation? Explain
Asked by ss919101 | 24 Mar, 2019, 08:19: PM
Expert Answer
Px=2
Py=2
MRSxy=2
= 1
Here MRSxy > px/ py
2>2/2
Now the consumer will consume more units of good X so that MRSxy declines and becomes equal to price to achieve consumer equilibrium.
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