How diminishing law guides consumer to get equilibrium?
A consumer buys/consumes a product only if marginal utility derived from it is more than marginal utility of money. As he continues consuming the marginal utility derived from every additional unit goes on diminishing but marginal utility of money remains constant. Both utilities match at a place i.e; where marginal utility of product becomes equal to marginal utility of money the consumer stops consumption thus equilibrium is struck.
No comments:
Post a Comment