📚 Learning Guide
Consumer Utility Maximization
hard

Order the steps a consumer should take to maximize utility when allocating their budget among different goods.

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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

Assess marginal utility for each good

B

Compare marginal utility per dollar spent

C

Adjust consumption until marginal benefits equal marginal costs

D

Allocate all budget to the good with the highest total utility

Understanding the Answer

Let's break down why this is correct

Answer

To maximize utility, a consumer should first understand their preferences and how much satisfaction each good provides. Next, they need to consider the prices of these goods and their total budget. By comparing the satisfaction or utility gained from each good relative to its cost, they can determine which goods give them the most value per dollar spent. For example, if a consumer finds that buying a slice of pizza gives them more satisfaction than a candy bar for the same price, they should buy more pizza until they reach their budget limit. Ultimately, the goal is to distribute their spending in a way that gives them the highest overall satisfaction.

Detailed Explanation

To get the most satisfaction, compare how much happiness each dollar gives you. Other options are incorrect because Just looking at how much happiness each good gives isn't enough; Adjusting until benefits equal costs is too vague.

Key Concepts

Consumer Utility Maximization
Marginal Utility
Budget Constraints
Topic

Consumer Utility Maximization

Difficulty

hard level question

Cognitive Level

understand

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