The optimal consumption rule implies that,if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides,with prices equal to P_Tickets and P_Rides,respectively,then it must be the case that MU_Tickets/MU_Rides = P_Ticket_s/P_Rides.

Question

Quizplus · Accepted Answer

The optimal consumption rule states that for a consumer to maximize utility, the marginal utility per dollar spent on all goods purchased must be equal. In this case, the ratio of the marginal utility of tickets to the price of tickets must be equal to the ratio of the marginal utility of rides to the price of rides. Therefore, the statement given in the question is true.

The Optimal Consumption Rule Implies That,if Pascal Is Maximizing His