If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then: A) MU_x/P_x MU_y/P_y. B) MU_x/P_x = MU_y/P_y. C) MU_x/P_x P_y/MU_y.

Question

If a consumer derives more utility by spending an additional $1 on good X rather than on good Y, then: A) MU_x/P_x > MU_y/P_y. B) MU_x/P_x = MU_y/P_y. C) MU_x/P_x < MU_y/P_y. D) P_x/MU_x > P_y/MU_y.

Quizplus · Accepted Answer

This statement is an expression of the marginal utility per dollar spent on each good. If a consumer derives more utility from good X, then the marginal utility per dollar spent on X is greater than that of Y. Therefore, the expression on the left side of the inequality is greater than the expression on the right side.

If a Consumer Derives More Utility by Spending an Additional