Question

What happens when price falls in a marginal utility scenario?

Answer 1

Consumer equilibrium gets disturbed. He consumes more to re-establish his equilibrium.enter link description here

Explanation:

To start with, let us assume the consumer is in equilibrium by equating MU with Price. After a fall in price, his MU is greater than price. He has to reduce the MU to equate it with price. It is possible only when he consumers more of the same good. As he consumes more, MU falls. Once it becomes equal to price, he stops additional consumption. He is in equilibrium now. Thus he maximizes his total utility.