Question

If Marginal utility (MU$_x$) of goods x = 0, Marginal utility (MU$_y$) = 0 and the price of y is Rs. 9, then what will be the price of x at equilibrium level?

• A. Rs. 9
• B. Rs. 30
• C. Rs. 15
• D. Rs. 12

Hint:

The equi-marginal principle helps determine the price and quantity of goods where a consumer maximizes their utility.

Answer 1

The Correct Option is C

Step 1: Understanding Consumer's Equilibrium:
At equilibrium, the ratio of marginal utility to price (MU/P) for each good should be equal. This is known as the equi-marginal principle. If the marginal utility of good x is zero (MU$_x$ = 0), the equilibrium price of good x must be such that the consumer gets no additional satisfaction from consuming more of good x.
Step 2: Applying the Given Information:
- Marginal utility of x (MU$_x$) = 0.
- Marginal utility of y (MU$_y$) = 0.
- Price of y = Rs. 9.
Since the consumer’s equilibrium is achieved when the MU/P ratio for both goods is equal, the price of good x (P$_x$) at equilibrium will be equal to the price of good y, which is Rs. 15.
Step 3: Conclusion:
The equilibrium price of x is Rs. 15, making option (C) the correct answer.