Taylor spends all of her income on tank tops and running shoes, and the price of a pair of running shoes is four times the price of a tank top. In order to maximize total utility, Taylor should buy
A)four times as many tank tops as pairs of running shoes.
B)four times as many pairs of running shoes as tank tops.
C)both items until the marginal utility of a pair of running shoes is four times the marginal utility of a tank top.
D)both items until the marginal utility of a tank top is four times the marginal utility of a pair of running shoes.

Question

Quizplus · Accepted Answer

To maximize utility, Taylor should allocate her spending so that the marginal utility per dollar spent is equal for both goods. Since running shoes are four times the price of tank tops, the marginal utility of a pair of running shoes should be four times the marginal utility of a tank top.

Taylor Spends All of Her Income on Tank Tops and Running