Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers will allocate their budget to maximize the total utility derived from their purchases.
B
Consumers ignore marginal utility when making budgeting decisions.
C
Consumers will always spend their entire budget on one single good.
D
Consumers do not consider their income when evaluating marginal utility.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal utility is the extra satisfaction or benefit a consumer gets from using one more unit of a good or service. When making budgeting decisions, consumers think about how much happiness or utility they will gain from each dollar spent. For example, if someone is deciding whether to buy a pizza or a movie ticket, they will consider which option gives them more enjoyment for the money. If the pizza provides more satisfaction than the movie ticket for the same cost, they will likely choose the pizza. This way, understanding marginal utility helps consumers allocate their budget to maximize their overall happiness.
Detailed Explanation
Consumers want to get the most happiness from their money. Other options are incorrect because Some might think that happiness from each purchase doesn't matter; It's a common mistake to think people only buy one thing.
Key Concepts
Consumer choice theory
Topic
Marginal Utility and Budgeting
Difficulty
easy level question
Cognitive Level
understand
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