A consumer buying food and clothing is in equilibrium when the marginal
A) utilities of food and clothing equal the total utilities of food and clothing.
B) utility of the last dollar spent on food equals the marginal utility of the last dollar spent on clothing.
C) utilities of both goods are the same.
D) utilities of both goods are the greatest.
E) utility of food equals the price of food and the marginal utility of clothing equals the price of clothing.

Question

Quizplus · Accepted Answer

In equilibrium, the consumer will allocate their budget to maximize the total utility they receive from the combination of food and clothing. This means that the marginal utility per dollar spent on each good should be equal. Therefore, the consumer is in equilibrium when the utility of the last dollar spent on food equals the marginal utility of the last dollar spent on clothing.

A Consumer Buying Food and Clothing Is in Equilibrium When