Given price of a good, how does a consumer decide as to how much of th

1.	Given price of a good, how does a consumer decide as to how much of that good to buy? Explain.
Answer» Consumer purchases up to the point where MU= Price. So long as MU > P, he keeps on purchasing. As he makes purchases, MU falls and at a particular quantity of the good MU becomes equal to price. Consumer purchases up to this point. Detailed Answer: Given price of a good, consumer Purchases that much of the commodity where rupee worth of additional satisfaction (MU_x/P_x) from the consumption of a unit more of a good is equal to the marginal utility of Money (MU_m) for the consumer. So that, in a state of equilibrium: (MU_x/P_x)= MU_m.

Given price of a good, how does a consumer decide as to how much of that good to buy? Explain.

Answer»

Consumer purchases up to the point where MU= Price. So long as MU > P, he keeps on purchasing. As he makes purchases, MU falls and at a particular quantity of the good MU becomes equal to price. Consumer purchases up to this point.

Detailed Answer:

Given price of a good, consumer Purchases that much of the commodity where rupee worth of additional satisfaction (MU_x/P_x) from the consumption of a unit more of a good is equal to the marginal utility of Money (MU_m) for the consumer. So that, in a state of equilibrium: (MU_x/P_x)= MU_m.

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