📚 Learning Guide
Marginal Utility and Budgeting
easy

If a consumer has a budget of $30 and finds that good A provides 5 utils per dollar while good B provides 3 utils per dollar, which should they prioritize to maximize satisfaction?

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Learning Path
Learning Path

Question & Answer
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2
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3
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4
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Choose the Best Answer

A

Good A

B

Good B

C

Both equally

D

None, they should save money

Understanding the Answer

Let's break down why this is correct

Answer

To maximize satisfaction with a budget of $30, the consumer should focus on the good that provides the most utility per dollar spent. In this case, good A gives 5 utils for every dollar, while good B gives only 3 utils. This means good A offers more satisfaction for each dollar spent, making it the better choice. For example, if the consumer spends all $30 on good A, they would receive 150 utils, while spending the same amount on good B would only yield 90 utils. Therefore, prioritizing good A will help the consumer get the most value from their budget.

Detailed Explanation

Good A gives more satisfaction per dollar spent. Other options are incorrect because Some might think good B is a good choice, but it gives less satisfaction per dollar; Choosing both equally ignores the fact that good A gives more satisfaction.

Key Concepts

Marginal Utility
Budgeting
Topic

Marginal Utility and Budgeting

Difficulty

easy level question

Cognitive Level

understand

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