If the price of steak rises,a consumer who had been maximizing his or her utility before will buy less steak because its
A) total utility falls.
B) ratio of marginal utility to price is now less than that for other goods.
C) marginal utility has fallen.
D) ratio of marginal utility to total utility falls.
E) ratio of marginal utility to price is now larger than that for other goods.

Question

Quizplus · Accepted Answer

When the price of steak rises, the ratio of marginal utility to price for steak falls. This means that the consumer will now get less satisfaction for each dollar spent on steak compared to other goods. As a result, the consumer will buy less steak and substitute it with other goods where the ratio of marginal utility to price is higher. This rational behavior will help the consumer to continue maximizing their utility.

If the Price of Steak Rises,a Consumer Who Had Been