Asked by Priyani Patel on Jul 21, 2024
Verified
If a consumer derives more utility by spending an additional $1 on good X,rather than on good Y:
A) MUx/Px > MUy/Py.
B) MUx/Px = MUy/Py.
C) MUx/Px < MUy/Py.
D) Px/MUx > Py/MUy.
Utility
In economics, a measure of the satisfaction or happiness that individuals get from consuming goods and services.
Good X
Placeholder term often used in economic models to represent a generic good or product.
- Decode the equal marginal utility per dollar spent formula in the realm of maximizing utility.
Verified Answer
CB
Carolyn BentleyJul 21, 2024
Final Answer :
A
Explanation :
This statement can be rewritten in terms of marginal utility per dollar (MUD). If the consumer derives more utility from spending an additional $1 on good X than on good Y, then MUDx > MUDy. Using the formula for MUD: MUS/PS, and assuming a constant budget (), we can rewrite the inequality as MUSx/PSx > MUSy/PSy. Therefore, choice A is the correct answer.
Learning Objectives
- Decode the equal marginal utility per dollar spent formula in the realm of maximizing utility.