Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers will ignore opportunity costs and choose the cheapest options available.
B
Consumers will allocate their budget in a way that equates the marginal utility per dollar spent across all goods.
C
Consumers will always choose the good with the highest price to maximize their utility.
D
Consumers will only consider the total costs of goods and ignore any potential trade-offs.
Understanding the Answer
Let's break down why this is correct
Answer
In a market equilibrium, consumers aim to get the most satisfaction, or utility, from their limited budget. Opportunity cost plays a big role here, as it refers to what a consumer gives up when they choose one option over another. For example, if you have $10 and decide to buy a pizza for $10, you miss out on the chance to buy a burger and fries for the same amount. This means that when making choices, consumers consider not only the price of goods but also the satisfaction they would lose by not choosing the alternative. By weighing these options carefully, consumers can make better decisions that maximize their overall happiness within their budget.
Detailed Explanation
Consumers want to get the most satisfaction from their money. Other options are incorrect because Some might think that picking the cheapest items is the best way to save money; It's a common mistake to believe that higher prices always mean better satisfaction.
Key Concepts
market equilibrium
opportunity cost.
Topic
Maximizing Utility with Budgets
Difficulty
medium level question
Cognitive Level
understand
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