JAMB Economics 2022 Paper

Concept: A consumer of a single commodity is in equilibrium when the satisfaction from the last unit consumed equals the price paid for it.Explanation:This is the condition for maximum total utility from a single good.Marginal utility ($MU$) is the extra satisfaction gained from consuming one additional unit.Price ($P$) is the amount the consumer pays for that unit.The consumer buys more of the commodity as long as $MU > P$.He stops buying when the marginal utility of the last unit falls to exactly equal its price.Therefore, the equilibrium condition for a single commodity $x$ is written as: $$MU_x = P_x$$ At this point, the consumer maximizes his total satisfaction and has no reason to buy more or less.Answer: Option B. He equates marginal utility and price.