Given two goods, X and Y, their prices, P_X and P_Y, a consumer is in equilibrium when the last dollar spent on X yields A)zero marginal utility for Y. B)the same marginal utility as if all the money were spent on Y. C)a smaller marginal utility than the last dollar spent on Y. D)the same marginal utility as the last dollar spent on Y.

Question

Quizplus · Accepted Answer

In equilibrium, the consumer will allocate their spending between X and Y such that the marginal utility per dollar spent on each good is equal. Therefore, the last dollar spent on X will yield the same marginal utility as the last dollar spent on Y.

Given Two Goods, X and Y, Their Prices, PX and PY

Given Two Goods, X and Y, Their Prices, P_X and P_Y