Asked by Rheagan Fischette on Jun 11, 2024
Verified
When consumers maximize utility, they are equating the ratio of marginal utility to price across all goods consumed.
Marginal Utility
Marginal utility is the change in total satisfaction or utility that a consumer experiences from consuming an additional unit of a good or service.
Utility Maximization
The process by which consumers allocate their spending to achieve the greatest level of satisfaction or utility from their available resources.
- Comprehend the significance of the price to utility ratio in decision-making by consumers.
Verified Answer
ZK
Zybrea KnightJun 14, 2024
Final Answer :
True
Explanation :
When consumers maximize utility, they aim to get the most satisfaction from their spending, which involves equating the ratio of the marginal utility (additional satisfaction from consuming one more unit) to the price for all goods and services they consume. This principle is known as the equimarginal principle in economics.
Learning Objectives
- Comprehend the significance of the price to utility ratio in decision-making by consumers.