What does the graph of consumer's equilibrium indicate about the relationship between marginal utility and price?
Understand the Problem
The question likely relates to understanding consumer equilibrium and the relationship between marginal utility and price in the context of economics. The graph illustrates these concepts with units of commodity and price metrics.
Answer
Marginal utility equals price (MU = Px) at consumer equilibrium.
Consumer equilibrium indicates that the marginal utility of a commodity equals its price (MU = Px). At equilibrium, consumers maximize their utility for each unit of currency spent.
Answer for screen readers
Consumer equilibrium indicates that the marginal utility of a commodity equals its price (MU = Px). At equilibrium, consumers maximize their utility for each unit of currency spent.
More Information
Consumer equilibrium is achieved when marginal utility adjusted for price, or MUx = Px, meaning consumers have no incentive to buy more or less of the good. This equilibrium helps ensure utility maximization.
Tips
A common mistake is misunderstanding equilibrium as a balance between quantity and price rather than marginal utility and price.
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