Which of the following conditions must hold if a consumer is maximizing her utility? A) MU_X × P_X = MU_Y × P_Y B) MU_X = MU_Y C) MU_X/P_Y = MU_Y/P_X D) MU_X/P_X = MU_Y/P_Y

Question

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The condition that must hold if a consumer is maximizing her utility is that the ratios of marginal utilities to prices must be equal for all goods consumed. This can be stated as MUs/Ps = MUy/Py, where MUs is the marginal utility of good x, Ps is the price of good x, MUy is the marginal utility of good y, and Py is the price of good y. Rewriting this equation, we get MUs/MUy = Ps/Py. Therefore, the correct condition is D) MU_X/P_X = MU_Y/P_Y.

Which of the Following Conditions Must Hold If a Consumer