If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 50 and MUᵧ/Pᵧ = 40, to maximize utility, the consumers should buy.
A) more of x and less of y.
B) more of both x and y.
C) less of x and more of y.
D) less of both x and y.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should allocate spending on the two goods such that the marginal utility per dollar spent is the same across both goods. In this case, MUₓ/Pₓ = 50 and MUᵧ/Pᵧ = 40, which means that the consumer is getting more utility per dollar spent on x than on y. Thus, the consumer should buy more of x and less of y to reach the same marginal utility per dollar spent on both goods.

If a Consumer Purchases a Combination of Commodities X and Y