The law of equi-marginal utility states that the consumer will distribute his money income between the goods in such a way that the utility derived from the last rupee spend on each good is equal. In other words, consumer is in equilibrium position when marginal utility of money expenditure on each goods is the same.

1. •How to allocate disposal income
among competing
uses
•The imperative of Prioritization

2.  Rationality
 Fixed income divisible in small units
 Utility measurable & comparable
 Prefect information
 Price taker
(Has minuscule power to influence market)

3.  Maximization of satisfaction : Utility derives
from the last rupees spent on competing
uses is equal.

4. Suppose a consumer has Rs. 24 to spend on two goods X&Y. Let
the price of goods X & Y be Rs.2 & 3 respectively. By looking at
the table it is clear that
1. MUx / Px =5 utilities, when consumer purchases 6 units of X.
2. MUy / Py =5 utilities, when consumer purchases 4 units of Y.
Thus in equilibrium position, he maximize his utility, when he is
buying 6 units of X and 4 units of Y and will be spending Rs.
24 (6*2+3*4) on them.
UNITS MUx MUy MUx/Px MUy/Py
1
2
3
4
5
6
20
18
16
14
12
10
24
21
18
15
9
3
10
9
8
7
6
5
8
7
6
5
3
1

5. GRAPH

6.  Utility ordinal concept
 Indivisibility of many goods
 MU of Money is not constant
 Mono commodity model
( satisfaction depends up on
complementarities)

7.  Consumer surplus
 MC= Lowest price
 MC is independent of fixed cost