Suppose a consumer is at an optimum. What happens when the price of one good she has been consuming increases?
A) The value of the marginal utility of the last unit consumed decreases.
B) The value of the marginal utility of the last unit consumed increases.
C) The marginal utility per dollar spent on the last unit consumed of that good increases by the same proportion as the price increases.
D) The marginal utility per dollar spent on the last unit consumed of that good is now smaller than the marginal utility per dollar spent on other goods the person consumes.

Question

Quizplus · Accepted Answer

If the price of a good the consumer has been consuming increases, the marginal utility per dollar spent on the last unit consumed of that good becomes smaller than the marginal utility per dollar spent on other goods the person consumes. This is because the consumer will now have to spend more money on the same amount of the good, therefore reducing the overall utility gained from consuming it. As a result, the consumer will likely shift their consumption towards other goods with a higher marginal utility per dollar spent.

Suppose a Consumer Is at an Optimum