If a consumer purchases a combination of commodities x and y such that MUₓ/Pₓ = 20 and MUᵧ/Pᵧ = 10, to maximize utility, the consumers should buy.
A) less of x and more of y.
B) more of x and less of y.
C) more of both x and y.
D) less of both x and y.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should equalize the marginal utility per dollar spent across all goods. Since MUₓ/Pₓ is greater than MUᵧ/Pᵧ, the consumer should buy more of x and less of y to increase the MUᵧ/Pᵧ ratio until it equals MUₓ/Pₓ.

If a Consumer Purchases a Combination of Commodities X and Y