In order to maximize utility, a consumer should allocate money income so that
A) the marginal utility of the last unit of each product consumed is greater than the total utility of each product consumed.
B) the total utility derived from each product consumed is the same.
C) the marginal utility obtained from the last dollar spent on each product is the same.
D) the elasticity of demand on all products purchased is the same.

Question

Quizplus · Accepted Answer

The consumer should allocate money income in such a way that the marginal utility obtained from the last dollar spent on each product is the same. This is known as the equimarginal principle, which suggests that the consumer should allocate their income among different goods and services in such a way that the utility derived from the last dollar spent on each product is equal. This will result in the highest possible total utility for the consumer.

In Order to Maximize Utility, a Consumer Should Allocate Money