For any two goods, X and Y, if MU_X divided by P_X equals 2.5 and MU_Y divided by P_Y equals 4.0, then with given income and prices the consumer should A) buy more of good X and less of good Y. B) buy more of good Y and less of good X. C) buy all of good Y and no X. D) stop because an equilibrium is achieved.

Question

Quizplus · Accepted Answer

The ratio of marginal utility to price is higher for good Y (4.0) than for good X (2.5). This indicates that the consumer receives more satisfaction per dollar spent on good Y than on good X. Therefore, the consumer should buy relatively more of good Y and less of good X.

For Any Two Goods, X and Y, If MUX Divided

For Any Two Goods, X and Y, If MU_X Divided