If a consumer reallocates his or her spending away from good B and towards good A, then the consumer's total utility will increase if: A)MU_A/P_A MU_B/P_B B)MU_A/P_A 0 and MU_B/P_B 0 D)MU_A/P_A

Question

If a consumer reallocates his or her spending away from good B and towards good A, then the consumer's total utility will increase if: A)MU_A/P_A > MU_B/P_B B)MU_A/P_A < MU_B/P_B C)MU_A/P_A > 0 and MU_B/P_B > 0 D)MU_A/P_A < 0 and MU_B/P_B < 0

Quizplus · Accepted Answer

This inequality represents the condition for the consumer to increase total utility by reallocating spending from good B towards good A. Specifically, the ratio of the marginal utility per dollar spent on good A must be greater than the same ratio for good B. This indicates that the consumer would gain more additional utility per unit of money spent on good A compared to good B.

If a Consumer Reallocates His or Her Spending Away from Good