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Difficulty: EasyCardinal Utility Analysis and Consumer Equilibrium

According to cardinal utility theory, a rational consumer consuming a single commodity reaches equilibrium when the marginal utility derived from that commodity is equal to its what?

Answer: price / the price / its price / market price / price of the commodity / the market price

Answer

Price
Under cardinal utility analysis, a consumer maximizes total utility when consuming a single commodity by equating the marginal utility (MUMU) gained from the last unit to the market price (PP) of the commodity (MU=PMU = P).

Step-by-Step Solution

1
Recall the consumer equilibrium condition for a single good under cardinal utility analysis.
The equilibrium condition is MUx=PxMU_x = P_x, where MUxMU_x is marginal utility and PxP_x is price.
A consumer maximizes total satisfaction when the monetary valuation of the extra utility gained from the last unit equals the market price paid for it.

Key Concept

Single-Good Consumer Equilibrium under Cardinal Utility
Estimated Time:45s
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Topics

Cardinal Utility Analysis and Consumer Equilibrium

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