Asked by Antonio DjToniko on Jul 18, 2024
Verified
Assume MUc and MUd represent the marginal utility that a consumer gets from products C and D,the respective prices of which are Pc and Pd.The consumer will increase his total utility from a specific money outlay by spending more on C and less on D if initially:
A)
MUd<MUc\mathrm { MU } _ { d } < \mathrm { MU } _ { c }MUd<MUc
B)
MUcPc<MUdPc\frac { \mathrm { MU } _ { c } } { P _ { c } } < \frac { \mathrm { MU } _ { d } } { P _ { c } }PcMUc<PcMUd
C)
MUcPc>MUdPd\frac { \mathrm { MU } _ { c } } { P _ { c } } > \frac { \mathrm { MU } _ { d } } { P _ { d } }PcMUc>PdMUd
D)
MUd>MUc\mathrm { MU } _ { d } > \mathrm { MU } _ { c }MUd>MUc
Marginal Utility
The additional utility or satisfaction gained from consuming one more unit of a good or service.
Specific Money Outlay
The exact amount of money expended on purchasing goods and services or on an investment.
- Comprehend the significance of the ratio between marginal utility and price in optimizing consumer satisfaction.
Verified Answer
BA
Brian ArellanoJul 21, 2024
Final Answer :
C
Explanation :
The consumer will increase his total utility by spending more on C and less on D if the marginal utility per dollar spent is higher for C than for D. This is expressed by the inequality:
MUcPc>MUdPd \frac{\mathrm{MU}_c}{P_c} > \frac{\mathrm{MU}_d}{P_d} PcMUc>PdMUd
Option C is the only one that satisfies this inequality.
MUcPc>MUdPd \frac{\mathrm{MU}_c}{P_c} > \frac{\mathrm{MU}_d}{P_d} PcMUc>PdMUd
Option C is the only one that satisfies this inequality.
Learning Objectives
- Comprehend the significance of the ratio between marginal utility and price in optimizing consumer satisfaction.
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