If a consumer is maximizing utility and then the price of Good A increases:
A) the marginal utility from the consumption of Good A will fall.
B) the marginal utility from the consumption of Good A will remain unchanged.
C) the marginal utility per dollar spent on Good A will decrease.
D) consumption of Good A will increase.

Question

Quizplus · Accepted Answer

If the price of Good A increases, the consumer's budget constraint shifts inward. In order to maximize utility with the new budget constraint, the consumer will have to adjust their consumption bundle. As a result, the marginal utility per dollar spent on Good A will decrease since the price has gone up but the consumer still wants to consume it. The other choices are incorrect because the marginal utility from the consumption of Good A can either increase or decrease depending on the specifics of the situation, and consumption of Good A may increase or decrease depending on the income and substitution effects.

If a Consumer Is Maximizing Utility and Then the Price