Question

A consumer experiences the following total utility from consuming a certain good:

If the price per unit is ₹4, at what quantity does the consumer stop purchasing under the equilibrium condition where M U m = 5?
 

• A. 2 units
• B. 3 units
• C. 4 units
• D. 5 units

Hint:

A consumer continues to purchase a good until the marginal utility of the last unit equals the price per unit. In this case, the consumer stops purchasing at 4 units when MU_m = 5.

Answer 1

The Correct Option is C

A consumer achieves equilibrium in microeconomics when the marginal utility per unit of a good (\(MUm\)) equals its price. Marginal utility is defined by the formula: \[MU = \Delta TU / \Delta Q\] where \(TU\) represents total utility and \(Q\) denotes quantity. The marginal utility for each consumed quantity is calculated as follows:- 1st unit: \(MU = 45 - 25 = 20\)- 2nd unit: \(MU = 60 - 45 = 15\)- 3rd unit: \(MU = 70 - 60 = 10\)- 4th unit: \(MU = 75 - 70 = 5\)Given a price of ₹4 per unit and the equilibrium condition \(MU_m = 5\), the marginal utility for the 4th unit is 5, which satisfies the equilibrium condition. Therefore, the consumer will purchase a total of 4 units.