If MU_x/P_x MU_y/P_y, the consumer can increase utility by buying less of good y, which means the MU_y will rise.

Question

If MU_x/P_x > MU_y/P_y, the consumer can increase utility by buying less of good y, which means the MU_y will rise.

Quizplus · Accepted Answer

This statement is true because the inequality suggests that the marginal utility per dollar spent on good x is greater than the marginal utility per dollar spent on good y. Therefore, the consumer can increase overall utility by shifting purchases towards good x and away from good y, causing the MU_y to rise.

If MUx/Px > MUy/Py, the Consumer Can Increase Utility by Buying

If MU_x/P_x > MU_y/P_y, the Consumer Can Increase Utility by Buying