explain the economic value of the folloing:-
MUX  by PX is equal to MUM when ''X'' happen to be a domestic fuel LPG and PX is lowered by the way os subsidy by the government.

When price of X  (LPG)  falls  due to subsidy granted by the government, then the equilibrium of consumer gets disturbed,That is,

MUxPx >MUm

Now, to reattain the equilibrium, consumer will increase the consumption of LPG, which in turn, would result in a fall in marginal utility of LPG. So, MUx will fall
and equlibrium equality will get reestablished ,that is, MUxPx=MUm

Hence, Consumer's equilibrium gets shifted to a higher level of satisfaction due to subsidies introduced by the government.
 

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