Jon is consuming X and Y so that he is spending his entire income and MU_x/P_x = 8 and MU_y/P_y = 4. To maximize utility, he should consume A) the same amount of X and Y since he is already maximizing utility. B) less of both X and Y. C) more X and less Y. D) less X and more Y.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Given that the marginal utility per dollar spent on X is 8 and on Y is 4, Jon should consume more of X (where he gets more utility per dollar spent) and less of Y to maximize his utility.

Jon Is Consuming X and Y So That He Is