Richard is consuming X and Y so that he is spending his entire income and MU_x/P_x = 6 and MU_y/P_y = 10. To maximize utility, he should A) continue to consume the same amount of X and Y since he is already maximizing utility. B) consume less of both X and Y. C) consume more X and less Y. D) consume less X and more Y.

Question

Quizplus · Accepted Answer

To maximize utility, the marginal utility per dollar spent on each good should be equal. Since the marginal utility per dollar spent on Y (10) is greater than that on X (6), Richard should consume less X and more Y to equalize these ratios.

Richard Is Consuming X and Y So That He Is