Given the price of a good, how will a consumer decide as to how much quantity to buy of that good ? Explain.
ANSWER: given price of that good, a consumer decides how much of that good to buy by comparing marginal utility(MU) with its price (P). The consumer will be at equilibrium,when marginal utility of that good is equal to its price of good i.e, Mux=Px.
If MUx > Px,i.e, when price is less than marginal utility,then consumer will buy more of that good.
On the other hand, If MUx < Px,i.e, when price is more than marginal utility,then consumer will buy less of that good.