Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
total utility
B
marginal utility
C
average utility
D
opportunity cost
Understanding the Answer
Let's break down why this is correct
Answer
To get the most enjoyment from their budget, a consumer should compare each good’s marginal utility—how much extra satisfaction it gives—to the price of that good. This comparison is usually expressed as marginal utility per dollar, which tells the consumer how many units of satisfaction they receive for each dollar spent. By equalizing this ratio across all goods, the consumer ensures that every dollar spent yields the same increase in total utility. For example, if a pizza slice gives 10 units of satisfaction and costs $2, its marginal utility per dollar is 5; if a soda gives 6 units for $1, its ratio is 6, so the consumer should buy soda first until the ratios equalize. This method guarantees the highest total utility for a given budget.
Detailed Explanation
A consumer looks at how much extra satisfaction each dollar gives for a good. Other options are incorrect because Total utility is the overall happiness from all purchases; Average utility is the average happiness per unit bought.
Key Concepts
Optimal Purchase Combinations
Marginal Utility
Budget Constraints
Topic
Optimal Purchase Combinations
Difficulty
easy level question
Cognitive Level
understand
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