WAEC Economics 2011 Paper

Concept:Consumer equilibrium is achieved when the marginal utility from a good equals the price paid for it.Explanation:Marginal utility ($MU_x$) is the extra satisfaction gained from consuming one additional unit of commodity $X$.The price ($P_x$) is the amount the consumer must give up to obtain that unit.If $MU_x > P_x$, the consumer gains more satisfaction than the cost, so buying more increases total satisfaction.If $MU_x < P_x$, the cost exceeds the extra satisfaction, so the consumer should reduce consumption.Total satisfaction is maximized at the point where the benefit from the last unit exactly equals its cost.Thus, the consumer maximizes satisfaction when price equals marginal utility.Answer:$P_x = MU_x$ (Option A).