Sam always tries to maximize his utility in his consumption of popcorn and soft drinks. Both of these goods are subject to diminishing marginal utility. Suppose the prices of these goods, along with Sam's income, stay the same, but Sam decides to decrease his consumption of popcorn. Holding everything else constant, this means that Sam must _____ his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be _____ than it used to be.
A) increase; greater
B) decrease; greater.
C) increase; less
D) decrease; less

Question

Quizplus · Accepted Answer

When Sam decreases his consumption of popcorn, the marginal utility per dollar spent on popcorn increases due to diminishing marginal utility. To maximize utility, he should increase his consumption of soft drinks to balance the marginal utility per dollar spent across both goods.

Sam Always Tries to Maximize His Utility in His Consumption