Suppose a glass of orange juice has a price of $2 and a glass of soft drink has a price of $1.If the consumer is maximizing utility,
A)juice must have higher MU than soda drink
B)the soft drink must have higher MU than juice
C)both must have equal MU
D)consumers would buy more soda drink than orange juice
E)the consumer would buy twice as much orange juice as soft drink

Question

Quizplus · Accepted Answer

If the consumer is maximizing utility, they would choose the option that gives them the highest amount of satisfaction per dollar spent. Since the price of orange juice is twice that of soft drink, for the consumer to be willing to pay that price difference, the marginal utility (MU) of orange juice must be higher than that of soft drink. Therefore, the best choice for the consumer would be to buy the orange juice.

Suppose a Glass of Orange Juice Has a Price of $2