A rational consumer will always shift a dollar from a good whose marginal-utility-to-price ratio is lower to one whose marginal-utility-to-price is higher.

Question

Quizplus · Accepted Answer

A rational consumer will aim to maximize their satisfaction or utility with their limited budget. This can be achieved by choosing goods that provide a higher marginal utility per dollar spent. In other words, the consumer will allocate their budget towards goods that provide the highest level of satisfaction relative to their price.

A Rational Consumer Will Always Shift a Dollar from a Good