Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Buy more of good A and less of good B
B
Buy equal amounts of both goods
C
Continue buying both goods without change
D
Buy more of good B and less of good A
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer is maximizing utility, they want to get the most satisfaction from their money. If the marginal utility per dollar spent on good A is greater than that of good B, it means that each dollar spent on good A gives them more satisfaction than a dollar spent on good B. Therefore, the consumer should buy more of good A and less of good B to increase their overall happiness. For example, if good A is a delicious pizza and good B is a soda, the consumer should spend more on pizza if it gives them more enjoyment per dollar. By doing this, they can maximize their total utility and feel more satisfied with their purchases.
Detailed Explanation
When good A gives you more satisfaction for each dollar, you should buy more of it. Other options are incorrect because Buying equal amounts ignores the fact that good A gives you more value; Not changing your purchases means missing out on better happiness.
Key Concepts
Consumer Utility Maximization
Marginal Utility
Budget Constraint
Topic
Consumer Utility Maximization
Difficulty
medium level question
Cognitive Level
understand
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