Consumers maximize total utility within their budget constraint by
A)buying the cheapest goods they can find.
B)buying whatever they like the best.
C)buying the goods with the largest marginal utility per dollar spent.
D)spending the same dollar amount for each good.

Question

Quizplus · Accepted Answer

Consumers aim to maximize their total utility and stay within their budget constraint. Therefore, they should choose goods that provide the greatest marginal utility per dollar spent. This means that they should allocate their budget towards goods that provide the most satisfaction per unit of money. Buying the cheapest goods they can find or spending the same dollar amount for each good may not necessarily provide them with the most utility. Similarly, buying whatever they like the best does not take into consideration the price of the good and its marginal utility.

Consumers Maximize Total Utility Within Their Budget Constraint by