A buyer has $20 to spend on rice and beans.Rice costs $2 and beans cost $3 per pound.The buyer is buying the combination of 4 pounds of rice and 4 pounds of beans.At this combination,her marginal benefit from rice is $14 and her marginal benefit from beans is $18.This buyer should ________.
A) buy less beans and more rice
B) buy more rice and less beans
C) buy more of both rice and beans
D) not change his consumption

Question

Quizplus · Accepted Answer

Since the buyer's marginal benefit (MB) from beans is higher than their MB from rice, it means that the buyer gets more satisfaction from buying beans than from buying rice. However, the price for beans is higher than the price for rice. Therefore, the buyer should buy more of the cheaper good (rice) and less of the more expensive good (beans) in order to maximize their satisfaction. In this case, the best option is to buy more rice and less beans, which will still allow the buyer to purchase a combination of both goods within her $20 budget.

A Buyer Has $20 to Spend on Rice and Beans