Why should a consumer purchase more of a commodity when MU must decline as consumption of the commodity increases (p. 55)?
Dear student,
Yes, this is true that with each additional consumption of a commodity, the marginal utility derived from it falls, but the consumer will increase the purchase of the commodity if the marginal utility derived is higher than its price.
In other words, we know that consumer equilibrium is when Px = MUx (in terms of money). So, even if MUx declines, as long as it is greater than Px, the consumer will buy more units of commodity X.
Yes, this is true that with each additional consumption of a commodity, the marginal utility derived from it falls, but the consumer will increase the purchase of the commodity if the marginal utility derived is higher than its price.
In other words, we know that consumer equilibrium is when Px = MUx (in terms of money). So, even if MUx declines, as long as it is greater than Px, the consumer will buy more units of commodity X.