The utility maximization and the
Explanation of Solution
The utility maximization is consistent with the law of demand. Assume that a bundle of goods X and Y is the utility-maximizing quantity of consumer and is currently in equilibrium. It can be expressed as MUx/Px = MUy/Py. As per the law of demand, there is a decrease in the quantity demanded as the
Law of demand: The law of demand explains the negative relation between price and quantity demanded, that is a higher price associated with a lower quantity demanded.
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Chapter 21 Solutions
ECONOMICS-APLIA ACCESS (2 TERMS)
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning