Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers will always buy the cheapest product available.
B
Consumers will allocate their budget in a way that the last unit of money spent on each good provides the same level of additional satisfaction.
C
Consumers will purchase more of a good regardless of its price.
D
Consumers will only buy goods until their total income is exhausted.
Understanding the Answer
Let's break down why this is correct
Answer
Utility maximization in marginal analysis means that consumers aim to get the most satisfaction or "utility" from the money they spend. When making purchasing decisions, consumers compare the additional satisfaction they gain from buying one more unit of a good to its cost. If the extra satisfaction, or marginal utility, of a product is greater than its price, it makes sense to buy it. For example, if a student considers buying a slice of pizza, they will think about how much happiness that slice will bring compared to its price. If the joy from eating the pizza is worth more than the money spent, the student will choose to buy it, maximizing their overall satisfaction.
Detailed Explanation
This means consumers spend their money so that each item they buy gives them the same extra happiness. Other options are incorrect because Some might think that buying the cheapest item is always best; It's a common belief that people will buy more of something no matter the cost.
Key Concepts
utility maximization
Topic
Marginal Analysis
Difficulty
easy level question
Cognitive Level
understand
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