A consumer maximizes his or her utility when expenditures are allocated such that
A)the total utility from each good is equal.
B)the total number of dollars spent on each good is equal.
C)the utility received from the last unit of each good is equal.
D)the utility received per dollar spent on the last unit of each good is equal.
E)the marginal utility is zero for each good consumed utility.

Question

Quizplus · Accepted Answer

Consumers maximize their utility when they allocate their expenditures such that the utility received per dollar spent on the last unit of each good is equal. This is because the marginal utility per dollar spent on a good is an indication of its value relative to its price. When the marginal utility per dollar spent on each good is equal, the consumer is getting the most satisfaction for their money spent. This is known as the principle of equal marginal utility per dollar spent.

A Consumer Maximizes His or Her Utility When Expenditures Are