Answer :

A consumer attains equilibrium in case of two goods when

MUx _ MUy

Px. Py

According to given question,

MUx _ 5 _ 1.25

Px. 4

MUy _ 4 _ 0.8

Py. 5

As MUy is lesser than MUx ,

Py. Px

Therefore, the consumer if not in equilibrium, will decrease the consumption of good y and increase the consumption of good x to achieve it.

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