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 should consume less of Good Y.

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 should consume less of Good Y.

Quizplus · Accepted Answer

The marginal utility per dollar of Good X is higher than that of Good Y, which means the consumer gets more satisfaction per dollar spent on Good X. Therefore, it would make sense for the consumer to consume less of the lower-value Good Y and more of the higher-value Good X.

Suppose the Marginal Utility of a Unit of Good X