If Callum is consuming his utility maximising bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (MU/P), and what should Callum do?
A)MU/P has increased, and Callum should buy more of this good.
B)MU/P has increased, and Callum should buy less of this good.
C)MU/P has decreased, and Callum should buy more of this good.
D)MU/P has decreased, and Callum should buy less of this good.

Question

Quizplus · Accepted Answer

When the price of one good rises, the marginal utility per dollar spent on this good (MU/P) decreases, as the price has gone up but the marginal utility remains the same. Therefore, Callum should buy less of this good to maximize his utility.

If Callum Is Consuming His Utility Maximising Bundle and the Price