Given two goods, X and Y, their prices, P_X and P_Y, a consumer is in equilibrium when the last dollar spent on X yields A)zero marginal utility for Y. B)the same marginal utility as if all the money were spent on Y. C)a smaller marginal utility than the last dollar spent on Y. D)the same marginal utility as the last dollar spent on Y. E)none of the above

Question

Quizplus · Accepted Answer

In consumer equilibrium, the last dollar spent on each good yields the same marginal utility. This principle is known as the equal marginal principle, indicating that consumers allocate their budget to maximize total utility, achieving equilibrium when the marginal utility per dollar is equal across all goods.

Given Two Goods, X and Y, Their Prices, PX and PY

Given Two Goods, X and Y, Their Prices, P_X and P_Y