Ice cream sells for Rs. 20. Mohini who likes ice- cream has already consumed 4. Her Marginal utlility of one rupee is 4. Should she consumes more ice cream or stop consuming and Why?

A consumer strikes his equilibrium when,  MUM=MUXPX
4=MUX20MUX=80

It implies that at equilibrium, marginal utility derived from ice cream must be equal to 80.
So we can say that, if 4 units of ice cream yield satisfaction of 80 utils then she must stop consuming more. But if â€‹marginal utility derived from ice cream is greater than 80 then she should consume more ice creams to strike equilibrium.

  • 11
What are you looking for?