The utility-maximizing rule states that the consumer will purchase the combination of goods X and Y such that A) MU_X /P_X = MU_Y/P_Y. B) MU_X = MU_Y. C) P_Y = P_X. D) total spending on X is equal to total spending on Y.

Question

Quizplus · Accepted Answer

The utility-maximizing rule, also known as the equi-marginal principle, states that consumers allocate their income in such a way that the last dollar spent on each good provides the same level of marginal utility per dollar spent. This is mathematically represented as MUx/Px = MUy/Py, where MU is the marginal utility and P is the price of goods X and Y, respectively. This matches the formula given in option A.

The Utility-Maximizing Rule States That the Consumer Will Purchase the Combination