Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers always choose the highest price product
B
Consumers allocate their income to maximize total utility
C
Utility functions are irrelevant in decision-making
D
Economic welfare is unaffected by consumer choices
Understanding the Answer
Let's break down why this is correct
Answer
Utility maximization is the idea that consumers try to get the most satisfaction or happiness from their purchases within their budget. When people choose what to buy, they consider the additional happiness, or marginal utility, they will get from each item. For example, if you are hungry and choose between a pizza and a salad, you might find that the pizza gives you more satisfaction than the salad, so you choose the pizza. This decision helps ensure that you feel as happy as possible with the money you spend, which is important for overall economic welfare. When many consumers make choices based on maximizing their utility, it can lead to a more efficient allocation of resources in the economy.
Detailed Explanation
Consumers want to get the most satisfaction from their money. Other options are incorrect because Some might think that higher prices mean better products; It's a common mistake to think that utility functions don't matter.
Key Concepts
Utility maximization
Utility function
Economic welfare
Topic
Marginal Utility and Consumer Choice
Difficulty
hard level question
Cognitive Level
understand
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