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

-If MU_X / P_X < MU_Y / P_Y then this consumer:

Question

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3 -If MU_X / P_X < MU_Y / P_Y then this consumer: A)will buy less of X and more of Y. B)will buy more of X and more of Y. C)is in equilibrium. D)will buy more of X and less of Y. E)will buy less of X and less of Y.

Quizplus · Accepted Answer

This inequality indicates that the marginal utility per dollar spent on good Y is greater than that of good X. In other words, each additional dollar spent on good Y provides more additional utility than each additional dollar spent on good X. Therefore, the consumer would find it optimal to decrease their consumption of good X and increase their consumption of good Y in order to maximize their overall utility given their budget constraint. This implies choice A, which is to buy less of X and more of Y.

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