Aisha and Debbie both purchase milk and bread at the same Quik Mart. They have different tastes for milk and bread and different incomes. They both buy some milk and some bread, but they buy considerably different quantities of the two goods. Which of the following statements is true, given that Aisha and Debbie are utility-maximizers?
A) In equilibrium, their marginal rate of substitution between milk and bread is the same.
B) In equilibrium, their marginal rate of substitution between milk and bread is higher for the person with the higher income.
C) In equilibrium, the marginal rate of substitution between milk and bread is greater for the person who prefers milk more than bread.
D) No statement can be made about their respective marginal rates of substitution without their budget constraint/indifference curve diagrams.

Question

Quizplus · Accepted Answer

In equilibrium, the marginal rate of substitution between milk and bread is the same for both Aisha and Debbie because they are both utility-maximizers. This means that they are both consuming the combination of milk and bread that gives them the most satisfaction, given their budget constraints.

Aisha and Debbie Both Purchase Milk and Bread at the Same