For David,the marginal utility from an additional car is 2,000 units and the marginal utility from an additional vacation is 1,000 units.David is allocating all his budget.Hence to maximize his utility,David will
A) shift his consumption from the vacation to the car.
B) shift his consumption from the car to the vacation.
C) save his budget by not spending it until he can afford both the car and the vacation.
D) buy both the car and the vacation now.
E) possibly do something, but there is not enough information available to determine what he would do.

Question

Quizplus · Accepted Answer

To determine the best course of action for maximizing utility, information about the prices of the car and the vacation, as well as David's budget, is necessary. Without this information, it's impossible to apply the principle of equating the marginal utility per dollar spent across all goods to maximize utility.

For David,the Marginal Utility from an Additional Car Is 2,000