question_answer

Given below is the utility schedule of a consumer for commodity X. The price of the commodity is Rs.3 per unit. How many units should the consumer consume to maximize satisfaction? Assume that utility is expressed in utils and 1 util = Rs.1. Give reasons for your answer.

Consumption (units)	1	2	3	4	5
Total Utility (utils)	8	15	20	23	25

Answer:

                    Total Utility and Marginal Utility Schedule for Commodity X

Consumption (units)	Total Utility (utils)	Marginal Utility (utils)
1	8	8
2	15	7
3	20	5
4	23	3
5	25	2

Now we know that a consumer consuming one commodity is at equilibrium when                         \[\frac{M{{U}_{X}}}{M{{U}_{M}}}={{P}_{X}}\]             The given condition will be fulfilled when the consumer is consuming 4th unit, because at this level of consumption,             \[\frac{3}{1}=3\]  i.e. 3=3 So, consumer should consume 4 units of commdity X to maximise satisfaction.