# Q.A consumer consumes only 2 goods X and Y and is in equilibrium.Price of X rises.explain the reaction of the consumer with the help of utility analysis.wat is the answer for this question

Dear Student,

A consumer consuming only two commodities  X  and  Y  attains equilibrium at that level where,

Marginal Utility of a Rupee spent on commodity  X   = Marginal Utility of a Rupee spent on commodity  Y = Marginal Utility of Money.

Or,

However, when the price of commodity x rises, the ratio of marginal utility to price of  X  becomes lower than that of  Y, that is

Whenever this happens, the consumer will rearrange his consumption bundles in a way such that the equality is restored. He would decrease his consumption of commodity  X .  With the decrease in the consumption of commodity  X , marginal utility of  X  rises. As a result, the ratio of marginal utility to price of   rises. The consumer would continue decreasing the consumption of commodity  X   till the equality between the ratio of marginal utility to price in case of  X  and  Y  is reached.

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