📚 Learning Guide
Marginal Utility and Budgeting
easy

If a consumer evaluates the marginal utility per dollar spent on two goods and finds that good X provides more satisfaction per dollar than good Y, what should they do?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Buy more of good X and less of good Y.

B

Buy equal amounts of both goods.

C

Buy more of good Y since it may be on sale.

D

Ignore marginal utility and spend equally on both.

Understanding the Answer

Let's break down why this is correct

Answer

When a consumer looks at how much satisfaction they get from spending their money on two different goods, they want to get the most value for each dollar spent. If good X gives them more satisfaction per dollar than good Y, it means that they are getting a better deal with good X. To maximize their overall happiness, the consumer should buy more of good X and less of good Y. For example, if good X is a delicious sandwich that costs $5 and gives them 10 units of satisfaction, while good Y is a drink that costs $2 and gives them 3 units of satisfaction, the sandwich offers better value. By focusing on good X, the consumer can enjoy more satisfaction from their budget.

Detailed Explanation

Good X gives you more happiness for each dollar you spend. Other options are incorrect because Buying equal amounts ignores the fact that good X is a better deal; Just because good Y is on sale doesn't mean it's a better choice.

Key Concepts

Marginal Utility
Budgeting
Consumer Choice
Topic

Marginal Utility and Budgeting

Difficulty

easy level question

Cognitive Level

understand

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