For two goods,A and B,the rational spending rule is expressed as

Question

Quizplus · Accepted Answer

The rational spending rule states that for two goods, the ratio of the marginal utility per dollar spent on each good must be equal for the consumer to maximize their utility. This can be expressed as (MUA/PA) = (MUB/PB). By rearranging and cross-multiplying, we get (MUA/MUB) = (PA/PB). This is the same as (MUA/PA) = (MUB/PB). Therefore, the correct expression is (MUA/PA) = (MUB/PB), or alternatively, (MUA/PA) * PB = (MUB/PB) * PA. This is equivalent to the expression in choice E, (MU_A/P_A) = (MU_B/P_B).

For Two Goods,A and B,the Rational Spending Rule Is Expressed