Question : The concept of consumer equilibrium refers to a situation where:
Option 1: The consumer is maximizing total utility.
Option 2: The consumer is maximizing marginal utilitv.
Option 3: The consumer is consuming goods in equal proportions.
Option 4: The consumer is consuming goods within the budget constraint.
Correct Answer: The consumer is maximizing marginal utilitv.
Solution : The correct answer is (b) The consumer is maximizing marginal utility
In consumer equilibrium, the consumer allocates their limited income in a way that maximizes the marginal utility obtained from each additional unit of a good or service consumed. This means that the consumer reaches a point where the ratio of marginal utilities of goods consumed is equal to the ratio of their prices, given their budget constraint. By maximizing marginal utility, the consumer achieves the highest level of satisfaction or utility.
Option 2: The consumer is maximizing marginal utility.
Question : In the cardinal utility approach, consumer's equilibrium is achieved when:
Option 1: Total utility is maximized.
Option 2: Marginal utility is maximized.
Option 3: Marginal utility equals zero.
Option 4: Marginal utility per dollar spent is equal across all goods.
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