In order to maximize his or her utility,a consumer must allocate his or her entire budget and
A) buy the combination of goods that makes the marginal utility per dollar from all goods as small as possible.
B) buy the combination of goods that equalizes the total utility per dollar from all goods.
C) do nothing else because when the entire budget is allocated, utility is maximized.
D) buy the combination of goods that equalizes the marginal utility per dollar from all goods.
E) buy the combination of goods that makes the marginal utility per dollar from all goods as large as possible.

Question

Quizplus · Accepted Answer

In order to maximize utility, a consumer needs to allocate his or her budget in a way that the marginal utility per dollar is equal for all goods. This means that every dollar spent should result in the same increase in satisfaction, regardless of the goods being purchased. This is achieved by buying the combination of goods that equalizes the marginal utility per dollar from all goods.

In Order to Maximize His or Her Utility,a Consumer Must