Suppose the consumer has allocated his or her entire budget.Which of the following conditions is also required for total utility to be maximized?
A) Marginal utility has decreased to zero for all goods.
B) The least inexpensive combination of goods has been purchased.
C) The marginal utility for each good is equal.
D) The marginal utility divided by price for each good is equal.
E) The number of units of each good consumed must be the same.

Question

Quizplus · Accepted Answer

For total utility to be maximized when the consumer has allocated his or her entire budget, the condition that must also be met is that the marginal utility per dollar spent (marginal utility divided by price) for each good is equal. This ensures that the consumer is getting the maximum possible satisfaction from their budget by equating the utility gained per unit of currency across all goods.

Suppose the Consumer Has Allocated His or Her Entire Budget