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WAEC Economics 1996 Question 8

Question 8

Theory of Consumer Behaviour

MUX/MUY = PX/PY (where X and Y = good X and good Y; MU = Marginal Utility; P = Price).
The above represents the

  1. A.marginal utility equation
  2. B.equation for consumer dis-equilibrium
  3. C.utility maximization equation
  4. D.equation for total utility
  5. E.equation for price elasticity
Show the answer and explanation

Answer: C (utility maximization equation)

Explanation

A consumer maximises utility (is in equilibrium) when the ratio of marginal utilities equals the ratio of prices.