Explain the conditions of consumer's equilibrium under utility analysis
Explain the conditions of consumer's equilibrium under utility analysis.
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The two conditions are :
(i) The ratio of marginal utility to price is same in case of all the goods consumed. Suppose the consumer consumes only two goods x and y then
MUx / Px=MUy / Py
(ii) Marginal utility has a tendency to fall as more and more units are consumed.
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