UPSC Prelims 1998 · General Studies

Question 17: Economy and Social Development

A consumer is said to be in equilibrium, if

ahe is able to fulfil his need with a given level of income

bhe is able to live in full comforts with a given level of income

che can fulfil his needs without consumption of certain items

dhe is able to locate new sources of income

AnswerThe answer is (a).

A consumer is in equilibrium when he gets the maximum satisfaction from spending a given income on the goods available, so he has no reason to change his purchases. In the cardinal approach this happens when the marginal utility per rupee spent is equal across goods; in the ordinal approach, when the budget line touches the highest possible indifference curve. Of the options, only the first speaks of meeting his wants within the given income.

Why each option is right or wrong

(a) Right (closest): his wants are met within the income he has, so he has no reason to change.
(b) Equilibrium is the best use of income, not living in full comfort.
(c) Equilibrium is the best choice among items, not giving some up.
(d) New sources of income raise the budget; they do not describe equilibrium at a given income.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 1998, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.