When a consumer maximizes utility subject to a limited income,she allocates income across goods to the point that:
A) the marginal price is the same for all goods.
B) marginal utility is zero.
C) marginal utility is negative.
D) the marginal utility per dollar spent is the same for all goods.

Question

Quizplus · Accepted Answer

When a consumer maximizes utility subject to a limited income, she allocates income across goods to the point where the marginal utility per dollar spent is the same for all goods. This is also known as the equimarginal principle. This means that the consumer is getting the most satisfaction possible for each dollar spent across all goods.

When a Consumer Maximizes Utility Subject to a Limited Income,she