To be in equilibrium (i.e., to maximize satisfaction), the consumer must:
A)purchase no inferior goods.
B)equalize the marginal utilities of the last unit purchased of every commodity.
C)be sure that the prices of all commodities purchased are proportional to their total utilities.
D)be sure that the price of each good is equal to the marginal utility of money.
E)allocate income so that the last penny spent on any good generates the same increment of utility as the last penny spent on any other good.

Question

Quizplus · Accepted Answer

This statement refers to the marginal utility theory of consumer behavior, and the concept of maximizing satisfaction by allocating income such that the last penny spent on each good generates equal utility. This is also known as the principle of equimarginal utility, and suggests that consumers will continue to consume a good until the marginal utility (additional satisfaction) gained from the last unit bought is equal to the price paid. Therefore, the best choice is E.

To Be in Equilibrium (I