When a consumer spends income so that the ratio of marginal utilities (MUs)of all goods purchased equals the ratio of their prices, the consumer is
A)maximizing marginal utility
B)spending too much on all goods
C)maximizing total utility
D)beyond the point of diminishing marginal utility
E)behaving in opposition to the principal of rational behavior

Question

Quizplus · Accepted Answer

When the ratio of marginal utilities equals the ratio of prices, the consumer is maximizing total utility by allocating their budget efficiently according to the principle of equi-marginal utility.

When a Consumer Spends Income So That the Ratio of Marginal