The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3

-Because incomes are limited, purchasing one thing means not being able to purchase other things. This indicates that:
A)marginal utility diminishes.
B)marginal utility is constant.
C)people will allocate their income among goods so as to achieve the most satisfaction.
D)people will allocate their income among goods so that the marginal utilities of all goods is equal.
E)people will allocate their income among goods so that the marginal utilities of all goods is zero.

Question

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
 
-Because incomes are limited, purchasing one thing means not being able to purchase other things. This indicates that:
A)marginal utility diminishes. 
B)marginal utility is constant. 
C)people will allocate their income among goods so as to achieve the most satisfaction. 
D)people will allocate their income among goods so that the marginal utilities of all goods is equal. 
E)people will allocate their income among goods so that the marginal utilities of all goods is zero.

Quizplus · Accepted Answer

The limited income forces individuals to allocate it among various goods in such a way that they can attain maximum satisfaction. This means that they will choose the goods that give them the highest utility per unit of money spent, until the marginal utility per unit of money spent on each good is equal. In this way, they can achieve the highest level of satisfaction or utility from their limited income. Therefore, the correct answer is C - people will allocate their income among goods so as to achieve the most satisfaction.

The Below Table Shows the Average Utility (In Utils) Obtained