Microeconomics: Theory of Consumer Behaviour · Class 11 · CBSE · Commerce Economics
A consumer has a marginal utility of money of ₹2 per utils. If the marginal utility of a commodity is 10 utils and its price is ₹4, what does the con…
Practice question from Microeconomics: Theory of Consumer Behaviour (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · MCQ · Q-FA7156
A consumer has a marginal utility of money of ₹2 per utils. If the marginal utility of a commodity is 10 utils and its price is ₹4, what does the consumer's utility-maximising condition indicate?
- A.The commodity is being purchased in the utility-maximising quantity because its marginal utility equals its price.
- B.The commodity should be purchased in greater quantity because its marginal utility per rupee exceeds the marginal utility of money.Correct answer
- C.The commodity should be purchased in smaller quantity because its price exceeds its marginal utility.
- D.No conclusion can be drawn because marginal utility cannot be compared with price.
Solution
The utility-maximising condition is . Here, , which is greater than the marginal utility of money, 2. Therefore, the consumer should buy more of the commodity until the equality is restored.
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