question_answer

Given below is the utility schedule of a consumer for commodity X. The price of the commodity is Rs.6 per unit. How many units should the consumer purchase to maximize satisfaction? (Assume that the utility is expressed in utils and 1 util=Rs.1).

Consumption (units)	Total Utility (utils)	Marginal Utility (utils)
1	10	10
2	18	8
3	25	7
4	31	6
5	34	3
6	34	0

Answer:

The consumer will purchase 4 units because at this consumption level, Marginal Utility (MU) is equal to the price. At consumption level of less than 4 units, MU is greater than price. Therefore, there is a scope of increasing gain by purchasing more. If he buys more than 4 units, MU becomes less than the price. Therefore, there is a scope of increasing gain by purchasing less, so consumer maximises satisfaction at 4 units of consumption of commodity X.