Asked by Nicholas Boren on Apr 25, 2024
Verified
A consumer is maximizing her utility with a particular money income when
A) the total utility derived from each product consumed is the same.
B) MU a/ Pₐ = MU b/ Pᵦ = MU c/ Pc = . . . = MU n/ Pₙ .
C) MU a = MU b = MU c = . . . = MU n.
D) Pₐ = Pᵦ = Pc = . . . = Pₙ .
Utility Maximization
The process by which consumers adjust their consumption to get the highest level of satisfaction from their available resources.
MU/P Ratio
The ratio of marginal utility (the additional satisfaction from consuming one more unit of a good) to its price, often used in consumer choice theory to maximize utility.
- Investigate the practices of consumer behavior and the maximization of utility.
- Discover the circumstances enabling consumers to reach maximal utility.
Verified Answer
XJ
Xinyan Jiang7 days ago
Final Answer :
B
Explanation :
The correct answer is B) MUa/Pa = MUb/Pb = ... = MUn/Pn. This is the condition for consumer equilibrium in utility maximization, where MU represents marginal utility and P represents price. It means that the consumer is allocating their budget in such a way that the last dollar spent on each good provides the same amount of additional satisfaction.
Learning Objectives
- Investigate the practices of consumer behavior and the maximization of utility.
- Discover the circumstances enabling consumers to reach maximal utility.