if the marginal utility of a commodity is equal to its price then

Step 1: Analyze the question The question asks what it means when the marginal utility (MU) of a commodity equals its price (P). This concerns consumer behaviour and the theory of utility.

Step 2: The concept

• Marginal utility is the extra satisfaction gained from consuming one more unit of a commodity.
• A rational consumer keeps buying a good as long as the satisfaction from one more unit (MU) is greater than what it costs (P).
• If MU < P, the consumer is paying more than the satisfaction gained, so they cut back.
• When MU = P, the consumer cannot gain more by buying more or less. This is the condition for consumer equilibrium for a single commodity.

For many goods, the condition becomes: MUₐ/Pₐ = MU_b/P_b = ... = MU of money

Step 3: Check each option

• A. The consumer is in equilibrium: Correct. At MU = P, the consumer is maximizing satisfaction and has no incentive to change the quantity bought.
• B. More of the commodity can be consumed: Wrong. More would be bought only if MU > P. At MU = P, the consumer has stopped buying.
• C. Total utility is also equal to its price: Wrong. Total utility is the sum of all marginal utilities. It is not the same thing as MU or price.
• D. The market is not in equilibrium: Wrong. The condition concerns the individual consumer, not the market. Market equilibrium is where demand equals supply.

Step 4: Answer The correct option is A. the consumer is in equilibrium.

Exam tip: Remember "MU = P means Maximum satisfaction, so Peace (equilibrium)." If MU > P, buy more. If MU < P, buy less. If MU = P, stop, because you are in equilibrium.