Suppose that MU x/ Pₓ exceeds MU y/ Pᵧ . To maximize utility, the consumer who is spending all her money income should buy
A)less of X only if its price rises.
B)more of Y only if its price rises.
C)more of Y and/or less of X.
D)more of X and/or less of Y.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should allocate more of their budget to the good with the higher marginal utility per dollar spent, which in this case is X. Therefore, they should buy more of X and/or less of Y.

Suppose That MU X/ Pₓ Exceeds MU Y/ Pᵧ