Suppose the marginal utility of a unit of Good X = MU_x,the marginal utility of a unit of Good Y = MU_y,P_x = the price of a unit of Good x,and P_y = the price of a unit of Good Y.If MU_x/P_x MU_y/P_y,the consumer can increase utility by buying more of Good X.

Question

Suppose the marginal utility of a unit of Good X = MU_x,the marginal utility of a unit of Good Y = MU_y,P_x = the price of a unit of Good x,and P_y = the price of a unit of Good Y.If MU_x/P_x > MU_y/P_y,the consumer can increase utility by buying more of Good X.

Quizplus · Accepted Answer

This statement is true as it follows the law of diminishing marginal utility, which states that as a consumer buys more of a good, the marginal utility decreases. Thus, if the ratio of marginal utility to price is greater for Good X than for Good Y, buying more of Good X will increase the consumer's overall utility.

Suppose the Marginal Utility of a Unit of Good X