If a consumer is initially at an optimum, and then the price of X falls, then A) MUX/PX MUY/PY. B) MUX/PX

Name: If a consumer is initially at an optimum, and then the price of X falls, then A) MUX/PX > MUY/PY. B) MUX/PX < MUY/PY. C) MUX/PX = MUY/PY. D) MUX/MUY < PY/PX.
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Question

If a consumer is initially at an optimum, and then the price of X falls, then
A) MUX/PX > MUY/PY.
B) MUX/PX < MUY/PY.
C) MUX/PX = MUY/PY.
D) MUX/MUY < PY/PX.

Quizplus · Accepted Answer

When the price of X falls, the consumer can get more of X for the same amount of money, making the marginal utility per dollar spent on X greater than that of Y, until they adjust their consumption to reach a new optimum.

If a Consumer Is Initially at an Optimum, and Then