The equilibrium market basket is the one in which the
A) total utilities for each commodity consumed are equal.
B) marginal utility of the last dollar spent on all commodities purchased is the same.
C) marginal utility for each commodity is rising.
D) amount of money allocated to each commodity is proportional to the total utility received from each commodity.
E) price of each good is equal to its marginal utility.

Question

Quizplus · Accepted Answer

The equilibrium market basket is the one in which the marginal utility of the last dollar spent on all commodities purchased is the same. This is because in order for a consumer to maximize their utility, they should allocate their spending in a way that the marginal utility per dollar spent on each good is equal. This ensures that they are getting the most value for their money across all goods consumed.

The Equilibrium Market Basket Is the One in Which the