Under utility approach - Single commodity approach

 1) 

























Main formula:
MUₓ / MUₘ = Pₓ      

where MUₓ = marginal utility of commodity x.
           MUₘ = rupee worth of satisfaction.
              Pₓ   = price of commodity x.

when MUₓ / Pₓ = MUₘ  this is the equilibrium condition , when the rupee worth of satisfaction the consumer actually get (MUₓ / pₓ) is equal to the rupee worth of satisfaction that the consumer expect (MUₘ)

2) Working notes of above explanation:
Purchase of a commodity by a consumer depends on three factors:
1) Price of the commodity.
2) Marginal (and total) utility of the commodity.
3) Marginal utility of money.

Marginal utility of money refers to 'worth of a rupee' to a consumer. The consumer defines it in terms of utility that he derives from standard basket of goods that he can buy with a rupee. For example: If a rupee can buy 2 toffee , 1 pencil and a chewing gum, and if total utility from these good is (say) 2 utils to the consumer, then 2 is to be taken as marginal utility of money/rupee. This becomes his 'standard reference' whenever he is buying any commodity.

In this method we are checking whether MUₓ / Pₓ = MUₘ and in the below method we are checking whether MUₓ / MUₘ = Pₓ
both ways will point to same value of MUₓ 



OR

In this method we are checking whether MUₓ / MUₘ = Pₓ










BOTH ways are correct and give the same value of equilibrium point of MUₓ



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