An optimizing consumer will select the consumption bundle in which the
A)ratio of total utilities is equal to the relative price.
B)ratio of income to price equals the marginal rate of substitution.
C)marginal rate of substitution is equal to the relative price of the goods.
D)marginal rate of substitution is equal to marginal utility.

Question

Quizplus · Accepted Answer

An optimizing consumer will choose a consumption bundle where the marginal rate of substitution (MRS) is equal to the relative price of the goods. This condition ensures that the consumer is allocating their money so that the marginal utility per dollar spent is equal across all goods. Option C states the correct condition for an optimizing consumer.

An Optimizing Consumer Will Select the Consumption Bundle in Which