If a consumer reallocates his or her spending away from Good A and towards Good B, then the consumer's total utility will increase if: A)MUA/PA MUB/PB. B)MUA/PA 0 and MUB/PB 0. D)MUA/PA

Question

If a consumer reallocates his or her spending away from Good A and towards Good B, then the consumer's total utility will increase if: A)MUA/PA > MUB/PB. B)MUA/PA < MUB/PB. C)MUA/PA > 0 and MUB/PB > 0. D)MUA/PA < 0 and MUB/PB < 0.

Quizplus · Accepted Answer

If MUA/PA < MUB/PB, then the loss in utility from spending a dollar less on Good A will be more than compensated for by the increase in utility from spending a dollar more on Good B.

If a Consumer Reallocates His or Her Spending Away from Good