Consumers maximise total utility within their budget constraint by
A) buying the cheapest goods they can find.
B) buying whatever they like the best.
C) buying the goods with the largest marginal utility per dollar spent.
D) spending the same dollar amount for each good.

Question

Quizplus · Accepted Answer

Consumers aim to maximise their utility within their budget constraint, which means getting the most satisfaction out of every dollar spent. In order to achieve this, they should allocate their spending towards goods with the largest marginal utility per dollar spent, which means choosing goods that give the most additional satisfaction for each additional dollar spent. Buying the cheapest goods or spending the same dollar amount for each good does not necessarily lead to maximum utility, while buying whatever they like the best may not provide the best value for money.

Consumers Maximise Total Utility Within Their Budget Constraint by