Peter is deciding between consuming Good X and Good Y.At his current level of consumption,his marginal utility per dollar for Good X is less than the marginal utility per dollar for Good Y.To achieve the consumer optimum,Peter needs to
A) consume more of Good Y until the marginal utility per dollar for Good X is greater than the marginal utility for Good Y.
B) consume less of Good X or more of Good Y until the marginal utility per dollar for Good X and Good Y is equal.
C) consume more of both Good X and Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X.
D) consume less of both Good X and Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X.
E) continue at his current level of consumption.

Question

Quizplus · Accepted Answer

The consumer optimum is reached when the marginal utility per dollar for each good is equal. Since Peter's marginal utility per dollar is higher for Good Y, he should either consume less of Good X or more of Good Y. This will increase his marginal utility per dollar for Good Y and decrease it for Good X until they are equal. Therefore, choice B is the best choice.

Peter Is Deciding Between Consuming Good X and Good Y