If MU x /P x exceeds MU y /P y , then a household can increase its utility by spending more on X and less on Y.

Question

If MU x /P x  exceeds MU y /P y , then a household can increase its utility by spending more on X and less on Y.

John Vincent Quaicoe · Accepted Answer

Final Answer : True, Explanation :  The given expression compares the marginal utility per dollar spent on good X (MU x /P x ) to that on good Y (MU y /P y ). If the utility per dollar spent on X is higher than that on Y, then reallocating spending from Y to X will increase the overall utility of the household, according to the principle of equal marginal utility per dollar spent.

If MU_x/P_x exceeds MU_y/P_y, then a household can increase its utility by spending more on X and less on Y.

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Learning Objectives

Related questions

If MUx/Px exceeds MUy/Py, then a household can increase its utility by spending more on X and less on Y.

Definitions

Learning Objectives

Learning Objectives

Related questions

If MU_x/P_x exceeds MU_y/P_y, then a household can increase its utility by spending more on X and less on Y.