If a consumer purchases a combination of commodities a and b such that MUₐ/Pₐ = 40 and MUb/Pb = 60, to maximize utility, the consumer should buy:
A) less of both a and b.
B) less of a and more of b.
C) more of both a and b.
D) more of a and less of b.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Since MUₐ/Pₐ < MUb/Pb, the consumer should buy less of a (where they get less utility per dollar spent) and more of b (where they get more utility per dollar spent) to increase the overall utility.

If a Consumer Purchases a Combination of Commodities a and B