If a consumer allocates income between goods x and y, consumer equilibrium occurs when A)the indifference curve farthest from the origin is reached B)MU_x/P_x = MU_y/P_y and the budget is exhausted C)marginal utility is maximized D)MU_x = MU_y for the last unit consumed of each good E)consumer surplus equals 0

Question

Quizplus · Accepted Answer

Consumer equilibrium occurs when the consumer maximizes utility subject to their budget constraint. This is represented by the equation MU_x/P_x = MU_y/P_y, which means the last dollar spent on each good should give the same marginal utility. This condition ensures that the consumer is getting the most satisfaction possible given their budget.

If a Consumer Allocates Income Between Goods X and Y