The rule for rational budget allocation by a consumer is that the marginal utility of each good:
A)purchased divided by its price must be equal.
B)purchased multiplied by its price must be equal.
C)must be zero.
D)must be infinite.
E)none of the above.

Question

Quizplus · Accepted Answer

Rational budget allocation by a consumer occurs when they allocate their budget in a way that maximizes the total utility they can derive from the goods and services they buy. To achieve this, the consumer should allocate their budget in a way that the marginal utility of each good divided by its price is equal. This means that the consumer should choose goods that provide the same level of satisfaction for the money spent on them. Therefore, choice A is the correct answer.

The Rule for Rational Budget Allocation by a Consumer Is