If a consumer purchases a combination of commodities x and y such that MU_x/P_x = 20 and MU_y/P_y = 5, to maximize utility, the consumers should buy. A) more of x and less of y. B) less of x and less of y. C) more of both x and y. D) less of both x and y.

Question

Quizplus · Accepted Answer

The ratio of the marginal utility to price for commodity x is higher than that of commodity y (20 compared to 5). This means that the consumer gets more satisfaction per unit of money spent on commodity x than on commodity y. Therefore, to maximize utility, the consumer should buy more of commodity x and less of commodity y.

If a Consumer Purchases a Combination of Commodities X and Y