Given the price of a good, …
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Gaurav Seth 6 years, 7 months ago
The marginal utility of a good or service is the gain from an increase, or loss from a decrease, in the consumption of that good or service. In order to decide, how much of a good to buy at a given price, a consumer compares Marginal Utility (MU) of the good with its price (P). The consumer will be at equilibrium, when the Marginal Utility of the good will be equal to the price of the good.
i.e. MUx = Px
If MUx > Px, that is, when price is lesser than the Marginal Utility, then the consumer will buy more of that good.
On the other hand, if MUx < Px, that is, when price is more than the Marginal Utility, then the consumer will buy less of good.
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