If MU_x/P_xexceeds MU_y/P_y,then the consumer should A) consume more of good X and less of good Y B) consume less of good X and more of good Y C) consume less of both goods X and Y D) not change the consumption levels of X and Y E) consume more of good Z

Question

Quizplus · Accepted Answer

If MU_x/P_xexceeds MU_y/P_y, it means that the marginal utility per dollar spent on good X is higher than the marginal utility per dollar spent on good Y. To maximize utility, the consumer should consume more of the good with the higher marginal utility per dollar, which is good X, and consume less of the good with the lower marginal utility per dollar, which is good Y. Therefore, the best choice is to consume more of good X and less of good Y, which is option A.

If MUx/Px exceeds MUy/Py,then the Consumer Should

If MU_x/P_xexceeds MU_y/P_y,then the Consumer Should