The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3

-If a consumer purchases only two goods, X and Y, and if (MU_x / P_x) = (MU_y / P_y), then the consumer cannot reallocate her expenditures on X and Y to increase her utility unless she has more money to spend.

Question

The below figure shows the various combinations of the goods X and Y that yield different levels of utility.Figure 7.3

-If a consumer purchases only two goods, X and Y, and if (MU_x / P_x) = (MU_y / P_y), then the consumer cannot reallocate her expenditures on X and Y to increase her utility unless she has more money to spend.

Quizplus · Accepted Answer

The condition given in the statement is the condition for consumer equilibrium, where the marginal utility per dollar spent on X is equal to the marginal utility per dollar spent on Y. This means that the consumer cannot increase her utility by reallocating her expenditure on X and Y unless she has more money to spend. Therefore, the statement is true.

The Below Figure Shows the Various Combinations of the Goods