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.
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