Answer:
The consumer is not currently following utility maximising rule
Explanation:
A two commodity consuming consumer , is at utility maximising equilibrium, as per cardinal utility, when :
MU G1 / P G1 = MU G2 / P G2 ; where
MU G1 , PG1 & MU G2 , P G2 are marginal utilities & prices of good 1 & good 2 respectively.
Such because if Marginal Utility per unit price of any good is comparatively more than other, the consumer will consumer more of it & MU of that good will fall until equilibrium equality condition is restored.
Putting in formula, Given : MU G1 = 100 , P G1 = 50 , MU G2 = 80 , P G2 = 10 { Considering Video game as good 1 , books as good 2 }
[ 100 / 50 = 2 ] < [ 80 / 10 = 8 ]
So , Additional satisfaction pe unit price spend is not equal for both goods - videos & books. It is more for books. Hence , the consumer is not currently following utility maximising rule [is not at equilibrium].
