Which of the following are conditions of consumer’s equilibrium in a two commodity case where U =…
Budget-constrained interior equilibrium requires MU₁/P₁=MU₂/P₂ plus budget feasibility and appropriate second-order conditions. Neither zero unconstrained marginal utility…
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Which of the following are conditions of consumer’s equilibrium in a two commodity case where U = utility and P 1 and P 2 are prices of two goods ?
Answer and explanation
Correct answer D
Budget-constrained interior equilibrium requires MU₁/P₁=MU₂/P₂ plus budget feasibility and appropriate second-order conditions. Neither zero unconstrained marginal utility nor a zero marginal-utility ratio gives the condition; one own second derivative is insufficient.
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UGC NET Economics