Asked by unknown person on Jun 13, 2024
Verified
To maximize utility, a consumer should allocate money income so that the
A) elasticity of demand on all products purchased is the same.
B) marginal utility obtained from the last dollar spent on each product is the same.
C) total utility derived from each product consumed is the same.
D) marginal utility of the last unit of each product consumed is the same.
Marginal Utility
The supplementary satisfaction or advantage received from consuming one more unit of a good or service.
Utility Maximization
An economic principle that suggests individuals seek to achieve the highest level of satisfaction possible with their available resources.
Money Income
The total amount of monetary earnings received by an individual or household, including wages, salaries, benefits, and investment income.
- Understand the principle of utility maximization for consumers.
- Apply the concept of the marginal utility-to-price ratio in maximizing utility.
Verified Answer
PL
Philip LonginoJun 15, 2024
Final Answer :
B
Explanation :
To maximize utility, a consumer should allocate their money income so that the marginal utility per dollar spent on each product is equal. This ensures that the consumer is getting the maximum satisfaction possible from their spending, as no reallocation of spending could give them more utility. This principle is known as the equi-marginal principle.
Learning Objectives
- Understand the principle of utility maximization for consumers.
- Apply the concept of the marginal utility-to-price ratio in maximizing utility.