When income is allocated to two goods, x and y, consumer equilibrium occurs when A)MU_x = MU_y B)MU_x = MU_y, and the budget is exhausted C)MU_x/P_y = PU_x/P_y D)MU_x/P_y = PU_x/P_y, and some money is not spent E)MU_x/P_y = PU_x/P_y, and the budget is exhausted

Question

Quizplus · Accepted Answer

Consumer equilibrium occurs when the marginal utility per dollar spent on each good is equal, and the entire budget is exhausted.

When Income Is Allocated to Two Goods, X and Y