A consumer evaluates two items: Item A offers 50 units of satisfaction for $10, while Item B provides 80 units for $20. If the consumer has a budget of $30 and considers the opportunity cost, which item will yield the highest marginal utility per dollar spent?

Question

Seekh · Accepted Answer

The consumer compares the satisfaction each dollar buys. Item A gives 50 units for $10, so 5 units per dollar, while Item B gives 80 units for $20, which is 4 units per dollar. Because 5 > 4, Item A provides a higher marginal utility per dollar. With a $30 budget, buying three A’s gives 150 units, whereas buying one B and one A gives only 130 units, confirming that A yields the greater marginal benefit. Thus Item A is the better choice for maximizing satisfaction per dollar.

A consumer evaluates two items: Item A offers 50 units of satisfaction for $10, while Item B provides 80 units for $20. If the consumer has a budget of $30 and considers the opportunity cost, which item will yield the highest marginal utility per dollar spent?

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Deep Dive: Marginal Utility Per Dollar

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