Asked by Patrick Allison on Jun 23, 2024
Verified
Ben is exhausting his money income consuming products A and B in such quantities that MU a/ Pₐ = 7 and MU b/ Pᵦ = 9. Ben should purchase
A) more of A and less of B.
B) more of B and less of A.
C) more of both A and B.
D) less of both A and B.
MU/P
The ratio of marginal utility (MU) to price (P), representing the additional satisfaction gained per unit of currency spent.
Less Of
A comparative term indicating a reduced quantity or degree of something.
- Illustrate the relationship that exists between total utility, marginal utility, and consumer balance.
Verified Answer
BR
BFDIA RocksJun 25, 2024
Final Answer :
B
Explanation :
To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Since MU b/ Pᵦ is greater than MU a/ Pₐ, Ben should buy more of B and less of A to increase the marginal utility per dollar spent on A until it equals the marginal utility per dollar spent on B.
Learning Objectives
- Illustrate the relationship that exists between total utility, marginal utility, and consumer balance.