A consumer has a budget of $100 and is considering two products: Product X, which provides 20 units of utility for $20, and Product Y, which provides 30 units of utility for $30. If the consumer wants to maximize their utility while accounting for opportunity cost, which product should they choose to purchase if they can only choose one?

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Seekh · Accepted Answer

Both products give the same utility per dollar (20/20 = 1 and 30/30 = 1), so the consumer’s marginal utility per dollar is equal. However, buying Product Y gives 30 units of utility while buying Product X gives only 20 units, so the opportunity cost of choosing X is the extra 10 units of utility that Y would provide. Because the consumer can only buy one product, they should choose Product Y to maximize total utility while still spending the same amount per unit of utility. In short, Product Y is the better choice because it delivers more utility for the same dollar‑worth of spending.

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