Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Comparing the marginal utility per dollar of each good
B
Always choosing the most expensive items
C
Allocating budget to goods with the highest marginal utility per dollar
D
Ignoring the prices of the goods when making choices
E
Adjusting consumption based on changing prices and preferences
Understanding the Answer
Let's break down why this is correct
Answer
To maximize utility within a budget constraint, a consumer should focus on making choices that provide the most satisfaction for the money spent. This means comparing the prices and benefits of different goods to find the best value. For example, if a consumer has $10 to spend, they might choose between two snacks: one that costs $2 and gives a lot of enjoyment, and another that costs $5 but offers only a little more satisfaction. By choosing the snack that provides the most enjoyment per dollar, the consumer can maximize their overall happiness. Therefore, being mindful of both prices and the satisfaction gained from each option is key to making the best choice.
Detailed Explanation
Choosing items that give you the most satisfaction for each dollar spent helps you get the best value. Other options are incorrect because Thinking about how much satisfaction you get per dollar is important, but just comparing isn't enough; Buying the most expensive items doesn't guarantee happiness.
Key Concepts
Maximizing Utility
Budget Constraints
Marginal Utility
Topic
Maximizing Utility with Budgets
Difficulty
easy level question
Cognitive Level
understand
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