If the consumer purchases only two goods,X and Y,and if (MU_x / P_x) = (MU_y / P_y) then the consumer cannot reallocate her expenditures on X and Y to increase her utility,unless she has more money to spend.

Question

Quizplus · Accepted Answer

The equation implies that the marginal utility per dollar spent on both goods is the same. Therefore, the consumer is already maximizing her utility given her budget constraint. Without more money to spend, she cannot increase her utility by reallocating her expenditures on X and Y.

If the Consumer Purchases Only Two Goods,X and Y,and If