Prove that when the consumer is in equilibrium the marginal utility that is placed on the goods he/she consumes is equal to its price. Explain how the consumer can restore equilibrium if market condition changes.

Prove that when the consumer is in equilibrium the marginal utility that is placed on the goods he/she consumes is equal to its price. Explain how the consumer can restore equilibrium if market condition changes.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics

Section: Chapter Questions

Problem 5QP

See similar textbooks

Related questions

Q: A rational consumer would want as much as many goods as possible to maximize utility derived from…

A: Utility refers to the satisfaction or enjoyment a consumer can get from a service or good.

Q: In a two-good world, in which the goods are A and B, what does it mean to be in consumer…

A: When markets struggle to clear and find their final equilibrium point, they are considered to be in…

Q: Question 9 Rational consumer behaviour is where a person consumes the amount of a good that…

A: Consumers consume commodities and services and in return, they attain utility or satisfaction from…

Q: Signs of life -Summarize in your own words the distinctions between “Wants and ‘ need”

A: Economics is a study of social science, which deals with production, distribution and consumption.…

Q: Good X:_____ units Good Y: _____ units b. Suppose that the budgented amount falls to $5. This…

A: Equation for consumer budget. px is price of quantity x py is price of quantity y m = income of…

Q: Emily is considering a move from Galway to London. She only consumes food and clothing and the table…

A: Rational selection theory states that people place confidence in rational calculations to form…

Q: Price for good A is $6 and good b is $8. Budget is $36. Good A…

A: Consumer equilibrium will be achieved when the consumer will be able to exhaust all his budget.

Q: The MU of the last unit of good A consumed is 4 utils and the MU of the last unit of B consumed is…

A: Utility is maximized when marginal rate of substitution is equal to price ratio of goods. Marginal…

Q: How does utility theory differentiate a “need” from a “want”?

A: Utility alludes to the total fulfillment got from the utilization of a thing or service. As the…

Q: Describe how economists measure pleasure related to understanding the concept of utility. Include…

A: Utility is an idea given to how much fulfillment/bliss an individual additions from a specific…

Q: Market Demand Curve 12 Quenty Demanded Fon Nam Markat Demand Price 10 Yeg Som Gob Yam 10 2. 4. 4. 1.…

A: Answer: Correct options: (C) The 5th unit of the good Fon consumes is worth less than $6 to her. and…

Q: - According to cardinalists, which of the following is consumer equilibrium? a) It is the point…

A: C.) It is the point where the indifference curve and the budget line are tangent.

Q: Give an example of substitute pair and an example of complement pair that you have encountered and…

A: There are two types of related goods :- 1. Substitute goods : - those goods that can be consumed at…

Q: Please derive mathematically the condition for consumer equilibrium then give a short intuitive on…

A: The phrase "consumer equilibrium" refers to a state in which a consumer gets maximum satisfaction…

Q: In the below figure, a consumer is initially in equilibrium at point C. The consumer's income is…

A: Indifference curves are defiend as the locus of all the points with equal level of satisfaction.…

Q: Price for X is $1 and Y is $2. Budget is $9. Good X Good Y…

A: In economics, utility refers to the overall satisfaction derived from the consumption of a good or…

Q: Roisin consumes only two goods, X and Y, and her utility function is given by U = XY. Her income is…

A: Condition for equilibrium combination: Marginal Rate of Substitution = Price Ratio MRS = MUx/Muy =…

Q: The first unit of the good that Ying consumes is worth $1 to her. O The 4th unit of the good Som…

A: In order to answer this question, we analyse each of the options separately.

Q: The assumption about consumer is that ….............. a) consumers act in self-interest and do…

A: Consumers as economic agents are subject to certain assumptions in economics.

Q: Utility from consuming a good is understood by economists to mean; (a) how often we consume the…

A: The benefit or the satisfaction that a person derives from the consumption of goods and services is…

Q: Use the table below to answer the questions that follows Commodity x Quantity Commodity y Quantity…

A: Quantity of y Average utility of y Total utility of y Marginal utility of y 1 30 30…

Q: Using the consumer choice theory, explain how an individual decides how to adjust her preferred…

A: Consumer choice theory: It refers to the idea in which the consumers will try to purchase to…

Q: Question 8 The price of good X is $1.50 and that of good Y is $ 1. A particular consumer who…

A: A consumer's increased enjoyment from having one more unit of an item or service is referred to as…

Q: Which of the following defines marginal utility? a. the maximum amount of satisfaction from…

A: Utility is the satisfaction a consumer derives from consuming total units of the good.

Q: Explain the consumer equilibrium condition according to utility theory. Include in your answer the…

A: Equilibrium of a Single Good: When a consumer buys a commodity, he stops when the price and utility…

Q: Assume that pickled eggs are an inferior good and its market is currently in equilibrium. What will…

A: Given: Pickled Goods are inferior good and its market is currently in equilibrium.

Q: Advertisement is one of the factors that influence customers to increase demand for a specific good.

Q: 1. True/False: Partial equilibrium analysis only concerns supply or demand alone, whereas general…

A: Partial Equilibrium investigation looks at the impacts of strategy activity just for each great in…

Q: Suppose the price of good X decreases. The new consumer equilibrium level of good X will be:

A: The law of demand says that as the price of a commodity decreases the demand for that commodity…

Q: Which is the correct answer? Coffee and doughnuts are complements in consumption. Suppose the…

A: In microeconomics, the income effect is the shift in demand for a commodity or service produced by a…

Q: social preferences are not really preferences, and unselfish behavior is really motivated by the…

A: Consumer theory refers to the theory that helps us determine what a consumer should have in order to…

Q: Question 14: Market pressures continually swing back and forth, driving towards a particular price…

A: When the market moves from the equilibrium towards the disequilibrium market forces always works to…

Q: other goods

A: The law of demand depicts rise in price cause fall in quantity demanded or vice-versa, keeping…

Q: How must a consumer allocate her income in order to reach consumer equilibrium? in such a way that…

A: At the point when shoppers settle on decisions about the amount of labor and products to devour, it…

Q: A consumer is in equilibrium at point A in the accompanying figure. The price of good X is $5. At…

A: Answer: (1). According to the above figure, the consumer consumes 10 units of good X at point A.…

Q: Explain through the optimal choice of a person how their individual demand function arises. Use an…

A: Demand Demand is the amount of a commodity that consumers are willing to purchase at various…

Q: Suppose a person allocates a given budget between food and clothing. If food is an inferior good can…

A: Demand for Inferior goods decline with an increase in income.

Q: Question 3 The equilibrium condition which maximizes the satisfaction of a consumer is given…

A: Consumer Equilibrium is the state of rest where the consumer gets maximum satisfaction and where…

Q: If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the…

A: The markets have two sides, the demand side, where the buyers, and consumers operate, and the other…

Q: explain the Constructing Utility from Demand in microeconomics

A: The following concepts in relation to Microeconomics is explained as follows:

Q: The set of all the alternatives a consumer can afford is shown by a) an indeffirence curve b) a…

A: In economics, we study how scarce resources are used by decision-makers to satisfy the unlimited…

Question

a) Prove that when the consumer is in equilibrium the marginal utility that is placed on the goods he/she consumes is equal to its price. Explain how the consumer can restore equilibrium if market condition changes.

Definition Definition Satisfaction derived from the consumption of an additional unit of any commodity.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Question 3 The equilibrium condition which maximizes the satisfaction of a consumer is given by: P X = P Y MU X = MU Y MU X / Q X = MU Y / Q Y None of the suggested options MU X / P X = MU Y / P Y
Suppose a consumer has a budget of $200 to spend on two goods, X and Y, whose prices are $20 and $10, respectively. If the consumer is observed to buy 5 units of X and 10 units of Y, where the respective Marginal Utilities of X and Y are, 50 and 40 utils, is the consumer in equilibrium? Explain why or why not. If the consumer is not in equilibrium under conditions in d), suggest another combination that would possibly achieve equilibrium. Explain your answer.
Which is the correct answer? Coffee and doughnuts are complements in consumption. Suppose the economy expands so that consumer income increases, and coffee is a normal good. What impact does this change in the coffee market have on the doughnut market under a general equilibrium analysis? A. Doughnut demand shifts leftward and doughnut price and quantity decline. B. Doughnut demand shifts leftward, doughnut price declines, and doughnut quantity increases. C. Doughnut demand shifts rightward, doughnut price increases, and doughnut quantity declines. D. Doughnut demand shifts rightward and doughnut price and quantity increase.
Do you think the model of consumer equilibrium describes how people really make the decisions on what to order to in a restaurant to maximize their utility? Is there a better model to measure consumer choice?
With the aid of a diagram, describe a corner solution and explain the axioms of consumer choice.
Question 2 True or False Provide a brief explanation For the Cobb-Douglas utility function the optimal choice of good i is independent of the price of good j. Full explain this question very fast
Question 14: Market pressures continually swing back and forth, driving towards a particular price where the quantity supplied equals the quantity demanded. This point is called A Maximum Supply B Minimum demand C Optimal Utility D Price Equilibrium
Q. The set of all the alternatives a consumer can afford is shown by a) an indeffirence curve b) a budget line c) a supply curve d) a tradeoff
The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 9. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium? Multiple Choice $3 and $4 $4 and $3 $9 and $12 $15 and $10
What condition should be met in order for the consumer to maximize satisfaction in the consumption of good X and good Y? Provide the calculation that satisfies the equilibrium condition.
Suppose the price of good X decreases. The new consumer equilibrium level of good X will be: higher than before the price change. lower than before the price change. indeterminate without more information. the same as before the price change.
If a consumer's marginal utility was 10 utils per unit of meat and 5 utils per unit of potatoes: a. the consumer should purchase less potatoes and more meat to maximize his satisfaction. b. the consumer would be in equilibrium if the per-unit price of meat was twice the price of potatoes. c. the consumer would be in equilibrium if the price per unit of meat was half the price of potatoes. d. the consumer's total utility could be increased by consuming more potatoes and less meat until the marginal utilities of the two goods were equal.