Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA and PB stand for the price of goods A and B, respectively. Which statement must hold for consumer equilibrium?
A)MUA = MUB
B)MUA = MUB and PA = PB
C)MUA/MUB = PB/PA
D)MUA/MUB = PA/PB
E)MUAPA = MUBPB

Question

Quizplus · Accepted Answer

Consumer equilibrium occurs where the ratio of marginal utility of a good to its price is equal to the ratio of the marginal utility of the other good to its price. Mathematically, MUA/PA = MUB/PB or MUA/MUB = PA/PB. So, option D is the correct statement that must hold for consumer equilibrium.

Let MUA and MUB Stand for the Marginal Utility of Goods