Assume that a consumer purchases a combination of product A and product B such that the MUₐ /Pₐ = 3 and MUᵦ /Pᵦ = 5. To maximize utility without spending more money, the consumer should
A)purchase more of product A and less of product B.
B)purchase less of product A and more of product B.
C)purchase more of both product A and product B.
D)make no change in purchases of products A and B.

Question

Quizplus · Accepted Answer

To maximize utility without spending more money, the consumer should adjust their consumption to equalize the marginal utility per dollar spent across all goods. Since MUᵦ/Pᵦ is greater than MUₐ/Pₐ, the consumer should purchase less of product A and more of product B to increase the MUₐ/Pₐ and decrease the MUᵦ/Pᵦ until they are equal.

Assume That a Consumer Purchases a Combination of Product a and Product