Unit-5 Consumer Equilibrium - Cardinal and Ordinal Approaches

In this unit, we continue the discussion on demand and focus our attention on consumer’s behaviour in order to explain the law of demand.

The following table shows combinations of two goods X and Y along an indifference curve.

  1. Calculate the marginal rate of substitution at each point on the indifference curve?
  2. When price of X is Rs.3.0 and the price of Y is Re.1.0, utility is maximised on this curve. What is the utility maximising combination? Explain.

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