Equilibrium Condition & Calculation
A consumer is in equilibrium when the ratio of the marginal utility of two commodities equals the ratio of their prices. Mathematically, this is represented as:
$ MRS_{XY} = \frac{P_X}{P_Y} $
Where:
- $MRS_{XY}$ is the Marginal Rate of Substitution of commodity X for commodity Y.
- $P_X$ is the price of commodity X.
- $P_Y$ is the price of commodity Y.
Solving for Price of Commodity X
We are given:
- $MRS_{XY} = 2.5$
- $P_Y = 16$
Substitute these values into the equilibrium condition:
$ 2.5 = \frac{P_X}{16} $
To find the price of commodity X ($P_X$), rearrange the equation:
$ P_X = 2.5 \times 16 $
Calculate the result:
$ P_X = 40 $
Therefore, the price of commodity X is 40.
Important Questions from Microeconomics
Which of the following statement is correct?
I. Indifference curves are sloping from left to right.
II. Higher indifference curve gives a higher level of utility.
If in a production process, all inputs are tripled, which of the following statements follows?
I. If the output is tripled, then decreasing returns to scale apply.
II. When the output is doubled, constant returns to scale apply.
III. If the output is more than tripled, then increasing returns to scale apply.
When it is not possible to make someone good without harming someone, then such a situation is called
According to Ricardo what condition is necessary to make possible international trade between two countries?
Match List I with List II:
List- I
Shape of revenue curve of the firm
List – II
Market structure
A.
Kinked revenue-curve (I)
Monopolistic competition B.
Infinitely elastic straight line curve (II)
Perfect competition C.
Relatively less elastic curve (III)
Oligopoly D.
Relatively high elastic curve (IV)
Monopoly.
Choose the correct answer from the options given below -
