If a consumer purchases a combination of commodities a and b such that MU_a/P_a = 100 And MU_b/P_b = 80, to maximize utility, the consumer should buy: A) less of both a and b. B) more of a and less of b. C) less of a and more of b. D) more of both a and b.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across goods. Since MUa/Pa > MUb/Pb, the consumer should buy more of a and less of b to increase total utility.

If a Consumer Purchases a Combination of Commodities a and B