Consider a consumer who is demanding goods 1 and 2. When the price of the goods are $(2,4),$ he demands $(1,2) .$ When the prices are (6,3) he demands $(2,1) .$ Nothing else of significance changed. Is this consumer maximizing utility?
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This is also known as the law of equi-marginal utility. In the first scenario, the ratio of the price of good 1 to good 2 is 2/4 = 0.5, and the ratio of the quantity demanded of good 1 to good 2 is 1/2 = 0.5. In the second scenario, the ratio of the price of Show more…
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