{"id":56635,"date":"2024-04-16T00:48:05","date_gmt":"2024-04-16T00:48:05","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=56635"},"modified":"2024-04-16T00:48:05","modified_gmt":"2024-04-16T00:48:05","slug":"the-prices-of-two-goods-x-and-y-are-px-rs-5-and-py-rs-3-respectively-if-a-consumer-spending-his-entire-income-on-these-two-commodities-is-at-a-point-on-the-budget-constraint-where-mrsxy-marg","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/the-prices-of-two-goods-x-and-y-are-px-rs-5-and-py-rs-3-respectively-if-a-consumer-spending-his-entire-income-on-these-two-commodities-is-at-a-point-on-the-budget-constraint-where-mrsxy-marg\/","title":{"rendered":"The prices of two goods X and Y are: Px = Rs. 5 and Py = Rs. 3, respectively. If a consumer spending his entire income on these two commodities is at a point on the budget constraint where MRSxy (marginal rate of substitution of X for Y) is 3 : 1, then"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a979142947bc\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"true\">\r\n                    the total utility of the consumer is being maximised at this point                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"false\">\r\n                    the total utility of the consumer will increase if he reallocates his expenditure leading to an increase in the amount of X and a reduction in the amount of Y                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    the total utility of the consumer will increase if he reduces his expenditure on both the commodities                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    the total utility of the consumer will increase if he reallocates his expenditure leading to an increase in the amount of Y and a reduction in the amount of X                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: A. the total utility of the consumer is being maximised at this point.<\/p>\n<p>The marginal rate of substitution (MRS) is the rate at which a consumer is willing to give up one good in order to obtain more of another good. It is <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> measured as the ratio of the marginal utility of the two goods.<\/p>\n<p>The budget constraint is the set of all combinations of goods that a consumer can afford given their income and the prices of the goods.<\/p>\n<p>At a point on the budget constraint where the MRS is equal to the price ratio, the consumer is in equilibrium. This is because the consumer is getting the same amount of utility from each additional unit of both goods.<\/p>\n<p>In this case, the MRS is 3 : 1 and the price ratio is 5 : 3. Therefore, the consumer is in equilibrium and their total utility is being maximized.<\/p>\n<p>If the consumer reallocates their expenditure leading to an increase in the amount of X and a reduction in the amount of Y, the MRS will be greater than the price ratio. This means that the consumer is getting more utility from each additional unit of X than they are from each additional unit of Y. This is not possible, as the consumer would have already chosen to consume more X and less Y if this were the case.<\/p>\n<p>If the consumer reduces their expenditure on both the commodities, the MRS will be less than the price ratio. This means that the consumer is getting less utility from each additional unit of X than they are from each additional unit of Y. This is not possible, as the consumer would have already chosen to consume less X and more Y if this <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> were the case.<\/p>\n<p>Therefore, the total utility of the consumer will not increase if they reallocate their expenditure leading to an increase in the amount of X and a reduction in the amount of Y, or if they reduce their expenditure on both the commodities. The total utility of the consumer is being maximized at the point where the MRS is equal to the price ratio.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Join Our Telegram Channel Subscribe on YouTube<\/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":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The prices of two goods X and Y are: Px = Rs. 5 and Py = Rs. 3, respectively. 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