Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Good A provides more satisfaction per unit than good B.
B
Good B is more expensive, hence it must be better.
C
The consumer has a fixed budget and cannot consider other goods.
D
Both goods provide equal satisfaction, but good A is cheaper.
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer finds that the marginal utility per dollar spent on good A is higher than that of good B, it usually means that good A provides more satisfaction for each dollar spent compared to good B. This could happen because good A is more useful or enjoyable to the consumer at that moment. For example, if a person is very thirsty, spending money on a refreshing drink (good A) might give them a lot of satisfaction, while spending the same amount on a snack (good B) might not feel as rewarding. Therefore, the consumer will likely choose to buy more of good A to maximize their overall happiness within their budget. This decision helps them get the most value from their spending.
Detailed Explanation
Good A gives more happiness for each dollar spent than good B. Other options are incorrect because Just because something costs more doesn't mean it's better; Having a fixed budget doesn't change how much happiness each good gives you.
Key Concepts
Marginal Utility
Budgeting
Consumer Choice
Topic
Marginal Utility and Budgeting
Difficulty
medium level question
Cognitive Level
understand
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