Ben is exhausting his money income consuming products A and B in such quantities that MU a/ Pₐ = 7 and MU b/ Pᵦ = 9. Ben should purchase
A)more of A and less of B.
B)more of B and less of A.
C)more of both A and B.
D)less of both A and B.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Since MU b/ Pᵦ is greater than MU a/ Pₐ, Ben should buy more of B and less of A to increase the marginal utility per dollar spent on A until it equals the marginal utility per dollar spent on B.

Ben Is Exhausting His Money Income Consuming Products a and B