question_answer

                                                                                  Ice-cream is available at Rs.10. Akansha who likes ice-cream, has already consumed 4 ice-creams. Her Marginal Utility (MU) of one rupee is 8. Should she consume more ice-cream or should she stop the consumption?

Answer:

A consumer attains equilibrium, when\[\frac{M{{U}_{X}}}{M{{U}_{M}}}={{P}_{X}}\] Where,\[M{{U}_{X}}\]= Marginal Utility of Commodity X             \[M{{U}_{M}}\]= Marginal Utility of Money              \[{{P}_{X}}\]= Price of Commodity X Substituting the given values, we get\[\frac{M{{U}_{X}}}{8}=10\]implying that, in a state of equilibrium, Akansha's must be equal to 80 utils. If having consumed 4th ice-cream, Akansha's\[M{{U}_{X}}=80\]utils, then she must stop consuming more. However, if\[M{{U}_{X}}>80\],then she should consume more ice-creams till\[M{{U}_{X}}\]reduces to 33 utils and in terms of its money worth is equal to price of ice cream.