If Ewan is consuming his utility maximising bundle and the price of one good falls, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Ewan do?
A)MU/P has increased, and Ewan should buy more of this good.
B)MU/P has increased, and Ewan should buy less of this good.
C)MU/P has decreased, and Ewan should buy more of this good.
D)MU/P has decreased, and Ewan should buy less of this good.

Question

Quizplus · Accepted Answer

If the price of one good falls, the MU/P of that good increases. This means that Ewan can now get more utility per dollar spent on this good, making it more attractive to him. Therefore, Ewan should buy more of this good to further increase his overall utility.

If Ewan Is Consuming His Utility Maximising Bundle and the Price