If a consumer wishes to maximize satisfaction given limited income and MU_x/P_x

Question

If a consumer wishes to maximize satisfaction given limited income and MU_x/P_x < MU_y/P_y then the consumer should: A) do nothing because she/he is in equilibrium. B) buy more of X and less of Y. C) buy more of Y and less of X. D) buy more of both X and Y. E) buy less of both X and Y.

Quizplus · Accepted Answer

The consumer should buy more of Y and less of X to equalize the marginal utility per dollar spent across goods, thereby maximizing satisfaction.

If a Consumer Wishes to Maximize Satisfaction Given Limited Income