Unless MU _ M is assumed to be constant, equilibrium of the consu… - Vidyadip

Question

Unless $MU _{ M }$is assumed to be constant, equilibrium of the consumer cannot be specified.

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Answer

True
It must be assumed that marginal utility of money $\left( MU _{ M }\right)$ is constant. [Marginal utility of money refers to 'worth of a rupee' to a consumer. It is a measuring rod (of utility) which must remain constant.] In case it is not constant, money value of utility cannot be determined and the equilibrium equation $\left(M U_x=P_x\right)$ becomes meaningless.

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