The MU/P equalization principle means consumers will spend their income (budget) so that the MU/P ratio of the goods consumed is
A) zero for each good
B) higher for goods the consumer wants the most (highest marginal utility)
C) maximized for the goods the consumer wants the most (highest marginal utility)
D) higher than TU/P
E) the same for each good

Question

Quizplus · Accepted Answer

The MU/P equalization principle states that consumers allocate their income in a way that the marginal utility per dollar spent (MU/P) is equal across all goods they consume. This ensures they get the most satisfaction possible from their spending.

The MU/P Equalization Principle Means Consumers Will Spend Their Income