Refer to the accompanying table. If the price of a t-shirt is $6 and the price of a sweater is $80, then the rational spending rule is satisfied when the consumer purchases ________ t-shirts and ________ sweaters.

A)4; 3
B)3; 4
C)4; 4
D)4; 1

Question

Refer to the accompanying table. If the price of a t-shirt is $6 and the price of a sweater is $80, then the rational spending rule is satisfied when the consumer purchases ________ t-shirts and ________ sweaters.

A)4; 3 
B)3; 4 
C)4; 4 
D)4; 1

Quizplus · Accepted Answer

The rational spending rule maintains that a consumer's total utility is maximized if the ratio of marginal utility to price is the same for all goods the consumer purchases. Here, the rational spending rule is satisfied when the consumer purchases 4 t-shirts and 1 sweater because the ratio of marginal utility to price would be 5 for both goods. That is, MUT/PT = 30/6 = 5, and MUJ/PJ = 400/80 = 5.

Refer to the Accompanying Table