Explain consumer equilibrium for two goods using marginal utility analysis, and derive the individual demand curve.

1. 1 · Define utility, TU and MU. Cardinal approach: utility measured in utils; MU = ΔTU ÷ ΔQ.
2. 2 · State the law of DMU with a table. Tea cups: MU 20, 16, 12, 8, 4, 0, −4. TU peaks where MU = 0.
3. 3 · Draw TU and MU curves. [Diagram: TU rising then flat then falling; MU falling, crossing zero where TU is maximum]
4. 4 · Equi-marginal condition. MUx/Px = MUy/Py and all income spent. Example: X = 3, Y = 4, both ratios 3, Rs. 500 spent.
5. 5 · Derive the demand curve. Px falls to Rs. 50: X rises to 5. Points (100, 3) and (50, 5) give a downward-sloping demand curve.
6. 6 · State assumptions and limits.
   • Utility not measurable
   • MU of money not constant
   • Cannot split income and substitution effects
7. 7 · Sri Lankan business link. Multi-buy discounts and buffet pricing in supermarkets and hotels rest on diminishing MU.
8. 8 · Conclude. Consumers balance MU per rupee across goods; a price fall upsets the balance and raises quantity demanded.

Scoring tip: Show the MU-per-rupee table. It makes the equilibrium obvious to the examiner.