[amp_mcq option1=”MUX = MUY = M2″ option2=”MD1\/P1 = MU2\/P2 = MU3\/P3″ option3=”MUX\/PX = MUY\/PY = MUZ\/PZ = MUM” option4=”None of the above” correct=”option3″]<\/p>\n
The correct answer is C. MUX\/PX = MUY\/PY = MUZ\/PZ = MUM.<\/p>\n
The consumer is in equilibrium when he plans his expenditure on x, y, and z commodities in such a way that he ultimately attains the same marginal utility per unit of money spent on each commodity. This is known as the law of diminishing marginal utility.<\/p>\n
The law of diminishing marginal utility states that as a consumer consumes more of a good, the marginal utility of that good decreases. This means that the consumer will get less satisfaction from each additional unit of the good that he consumes.<\/p>\n
In order to maximize his satisfaction, the consumer will allocate his income in such a way that he gets the same marginal utility from each additional unit of money that he spends on each good. This is achieved when the marginal utility per unit of money spent on each good is equal.<\/p>\n
Mathematically, this can be expressed as:<\/p>\n
MUX\/PX = MUY\/PY = MUZ\/PZ = MUM<\/p>\n
where:<\/p>\n
The law of diminishing marginal utility is a fundamental principle of economics. It helps to explain why consumers make the choices that they do. It also helps to explain why prices tend to rise as demand for a good increases.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”MUX = MUY = M2″ option2=”MD1\/P1 = MU2\/P2 = MU3\/P3″ option3=”MUX\/PX = MUY\/PY = MUZ\/PZ = MUM” option4=”None of the above” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-50578","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n