In equilibrium, the ratio of marginal utility to price for two respective goods is equal.

Question

Quizplus · Accepted Answer

In equilibrium, the consumer maximizes utility and the ratio of the marginal utility of a good to its price should be equal to the ratio of the marginal utility of the other good to its price. This is known as the equal marginal principle or equalization of the marginal utility per dollar spent. Therefore, option A is true.

In Equilibrium, the Ratio of Marginal Utility to Price for Two