Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The consumer should buy more of good A to maximize utility.
B
The consumer should buy an equal amount of goods A and B.
C
The consumer should buy more of good B to maximize utility.
D
The consumer should not buy any goods.
Understanding the Answer
Let's break down why this is correct
Answer
In this situation, the consumer has a budget of $100 and is trying to get the most satisfaction, or utility, from their money. The marginal utility per dollar spent on good A is 10, while for good B it is only 5. This means that for each dollar spent, good A gives more satisfaction compared to good B. To maximize utility, the consumer should spend more on good A because it provides more value for the money. Therefore, the best classification for the consumer's situation is that they should focus on purchasing more of good A to make the most of their budget.
Detailed Explanation
Good A gives more satisfaction for each dollar spent. Other options are incorrect because Thinking both goods give the same value can be misleading; Choosing to buy more of good B ignores its lower value.
Key Concepts
Maximizing Utility
Budget Constraints
Marginal Utility
Topic
Maximizing Utility with Budgets
Difficulty
medium level question
Cognitive Level
understand
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