Let MU equal marginal utility and P equal price. If the MU of root beer per dollar spent on a unit of root beer is greater than the MU of candy bars per dollar spent on a candy bar, the consumer
A) is maximizing utility.
B) should spend more on candy bars and less on root beer.
C) should spend more on root beer and less on candy bars.
D) is maximizing marginal utility.

Question

Quizplus · Accepted Answer

To maximize utility, a consumer should allocate their budget in a way that the marginal utility per dollar spent is equal across all goods. If the MU per dollar of root beer is greater than that of candy bars, the consumer should spend more on root beer and less on candy bars to equalize the MU per dollar across both goods.

Let MU Equal Marginal Utility and P Equal Price