A consumer has spent all of his income on hamburgers and movies. The price of a hamburger is $1 and the price of a movie is $6. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 24. The consumer has

Question

Quizplus · Accepted Answer

The consumer should allocate spending such that the marginal utility per dollar is equal for both goods. Currently, the marginal utility per dollar for hamburgers is 5, and for movies, it is 4 (24/6). Therefore, the consumer should buy more hamburgers and fewer movies to maximize utility.

A Consumer Has Spent All of His Income on Hamburgers