If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then: A) MUₓ/Pₓ MUᵧ/Pᵧ. B) MUₓ/Pₓ = MUᵧ/Pᵧ. C) MUₓ/Pₓ Pᵧ/MUᵧ.

Question

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then:
A) MUₓ/Pₓ > MUᵧ/Pᵧ.
B) MUₓ/Pₓ = MUᵧ/Pᵧ.
C) MUₓ/Pₓ < MUᵧ/Pᵧ.
D) Pₓ/MUₓ > Pᵧ/MUᵧ.

Quizplus · Accepted Answer

This statement implies that the marginal utility per dollar spent is higher for good X than for good Y. In other words, the consumer is getting more satisfaction per dollar spent on good X compared to good Y. Mathematically, this can be expressed as MUₓ/Pₓ > MUᵧ/Pᵧ, where MUₓ is the marginal utility of good X, Pₓ is the price of good X, MUᵧ is the marginal utility of good Y, and Pᵧ is the price of good Y. Therefore, option (A) is the correct answer.

If a Consumer Derives More Utility by Spending an Additional