How is total utility maximised in the consumption of two goods?
A)By equating the marginal utility for each good consumed.
B)By equating the marginal utility per dollar for each good consumed.
C)By equating the total utility of each good divided by its price.
D)By maximising expenditure on each good.

Question

Quizplus · Accepted Answer

Total utility is maximized by equating the marginal utility per dollar for each good consumed, which means getting the most satisfaction per unit of money spent. This is because we have limited income and must allocate it in the best way possible to get the most bang for our buck. By choosing goods with higher marginal utility per dollar, we ensure that we are getting the most utility per unit of money spent, leading to maximization of our overall utility.

How Is Total Utility Maximised in the Consumption of Two