Suppose that an individual consumes just two goods: Big Macs and milkshakes. In order to reach consumer equilibrium, the individual must arrange the consumption of Big Macs and milkshakes so that the:
A) marginal utility of the two goods is equal for the last dollar spent on each good.
B) ratio of marginal utility to price is the same for both goods for the last dollar spent on each good.
C) ratio of marginal utility of milkshakes to the marginal utility of Big Macs is 1 for the last dollar spent on each good.
D) price paid for the two goods is the same.

Question

Quizplus · Accepted Answer

Consumer equilibrium is achieved when the consumer allocates their budget in such a way that the ratio of marginal utility to price is equal for both goods. This means that for the last dollar spent on each good, the consumer is getting the same amount of satisfaction per unit of money spent. Therefore, choice B is the correct answer.

Suppose That an Individual Consumes Just Two Goods: Big Macs