If a consumer purchases a combination of commodities a and b such that MU_a/P_a = 50 and MU_b/P_b = 30, to maximize utility, the consumer should buy: A) less of both a and b. B) more of both a and b. C) more of a and less of b. D) less of a and more of b.

Question

Quizplus · Accepted Answer

The ratio of marginal utility to price should be equal for both commodities in order to maximize utility. 
Given: 
MUA/PA = 50
MUB/PB = 30
To reach equilibrium, the consumer should buy more of commodity A to decrease the ratio MUA/PA till it becomes equal to MUB/PB, while buying less of commodity B to increase the ratio MUB/PB till it becomes equal to MUA/PA. Hence, the consumer should buy more of commodity A and less of commodity B. Therefore, the correct answer is C.

If a Consumer Purchases a Combination of Commodities a and B