📚 Learning Guide
Maximizing Utility with Budgets
easy

Arrange the following steps in the correct order for maximizing utility within a budget: A) Calculate the marginal utility per dollar spent for each good, B) Compare the marginal utility per dollar for all goods, C) Purchase the combination of goods that equalizes the marginal utility per dollar spent, D) Identify the budget constraint and available goods.

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Learning Path
Learning Path

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Choose the Best Answer

A

D → A → B → C

B

A → B → C → D

C

D → C → A → B

D

B → A → D → C

Understanding the Answer

Let's break down why this is correct

Answer

To maximize utility within a budget, you first need to identify the budget constraint and the available goods. This means figuring out how much money you have to spend and what items you can buy with that money. Next, you calculate the marginal utility per dollar spent for each good, which tells you how much satisfaction you get for each dollar spent on different items. After that, you compare the marginal utility per dollar for all goods to see which ones give you the most satisfaction for your money. Finally, you purchase the combination of goods that equalizes the marginal utility per dollar spent, ensuring you get the most happiness from your budget.

Detailed Explanation

First, you need to know your budget and what goods you can buy. Other options are incorrect because This option suggests calculating and comparing before knowing your budget; This option skips the important step of comparing satisfaction per dollar.

Key Concepts

Maximizing Utility
Budget Constraints
Marginal Utility
Topic

Maximizing Utility with Budgets

Difficulty

easy level question

Cognitive Level

understand

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