A utility maximizing person has a utility function such that their marginal rate of substitution equals the amount of good Y they consume divided by the amount of good X that they consume (i.e.MRS = Y/X).If the prices of goods X and Y are the same,then the person will
A) consume more X than Y.
B) consume more Y than X.
C) consume equal amounts of X and Y.
D) we must know the person's income before coming to a conclusion.

Question

Quizplus · Accepted Answer

In order to maximize utility, the person will consume where their MRS (Y/X) equals the price ratio of the goods. Since the prices of goods X and Y are the same, the person will consume equal amounts of X and Y.

A Utility Maximizing Person Has a Utility Function Such That