📚 Learning Guide
Marginal Utility and Budgeting
easy

If a consumer has a budget of $30 and is evaluating two goods, A and B, with marginal utilities of 15 and 10 respectively, and prices of $5 and $2, which good should the consumer prioritize to maximize satisfaction per dollar spent?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

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

Choose the Best Answer

A

Good A only

B

Good B only

C

Both goods equally

D

None of the goods

Understanding the Answer

Let's break down why this is correct

Answer

To decide which good to prioritize, we need to look at the satisfaction gained from each dollar spent on goods A and B. The marginal utility per dollar spent is calculated by dividing the marginal utility by the price of each good. For good A, the marginal utility per dollar is 15 divided by 5, which equals 3. For good B, the marginal utility per dollar is 10 divided by 2, which equals 5. Since good B gives more satisfaction per dollar spent, the consumer should prioritize buying good B to maximize their overall happiness within the $30 budget.

Detailed Explanation

Good B gives more satisfaction for each dollar spent. Other options are incorrect because Some might think that higher total satisfaction means it's better; People might think buying both is a good idea.

Key Concepts

Marginal Utility
Budgeting
Consumer Choice
Topic

Marginal Utility and Budgeting

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.