If MUₓ/Pₓ exceeds MUᵧ/Pᵧ,then the consumer should
A)consume more of good X and less of good Y
B)consume less of good X and more of good Y
C)consume less of both goods X and Y
D)not change the consumption levels of X and Y
E)consume more of good Z

Question

Quizplus · Accepted Answer

If MUₓ/Pₓ exceeds MUᵧ/Pᵧ, it means that the marginal utility per dollar spent on good X is higher than that of good Y. This indicates that the consumer is getting more satisfaction from spending an additional dollar on good X than on good Y. As a rational consumer, the individual should therefore allocate more of their budget towards good X, and less towards good Y, in order to maximize their overall utility. Hence, the correct option is A.

If MUₓ/Pₓ Exceeds MUᵧ/Pᵧ,then the Consumer Should