If a consumer is choosing the bundle of goods that maximizes utility subject to a budget constraint,then
A)the rate at which income affects the utility-maximizing choice is equal for all goods.
B)the rate at which the consumer is willing to substitute between goods is equal to the market rate of exchange.
C)the ratio of marginal utility to price is equal for all goods.
D)both b and c
E)all of the above

Question

Quizplus · Accepted Answer

Option B is true because the consumer will only substitute between goods if the marginal utility per dollar spent on the two goods is equal. This means that the ratio of the marginal utility of one good to its price should be equal to the ratio of the marginal utility of the other good to its price. 
Option C is also true because the consumer will maximize utility by consuming more of the good with a higher ratio of marginal utility to price and less of the good with a lower ratio. 
Therefore, D is the correct answer. Option A is not necessarily true as the rate at which income affects the utility of different goods can vary.

If a Consumer Is Choosing the Bundle of Goods That