A consumer is maximizing her utility with a particular money income when A) the total utility derived from each product consumed is the same. B) MU_a/P_a= MU_b/P_b= MU_c/P_c= . . . = MU_n/P_n. C) MU_a= MU_b= MU_c= . . . = MU_n. D) P_a= P_b= P_c= . . . = P_n.

Question

Quizplus · Accepted Answer

The equation given in option B is the marginal utility per dollar spent equation (MUD). The consumer maximizes her utility when the marginal utility per dollar spent is equal for all products. This means that the consumer is getting the most satisfaction possible from each dollar spent and is allocating her budget efficiently. Therefore, the consumer should choose the products that satisfy the equation given in option B.

A Consumer Is Maximizing Her Utility with a Particular Money