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Question & Answer
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Consumers should always buy the good with the highest total utility regardless of price.
The optimal purchase combination occurs when the marginal utility per dollar spent is equal for all goods purchased.
Consumers will maximize their total utility by equalizing the marginal utility per dollar across all goods within their budget constraint.
If a good's price decreases, consumers will always increase their consumption of that good without considering other factors.
Marginal utility can change based on a consumer's preferences and consumption patterns.
Understanding the Answer
Let's break down why this is correct
People buy the mix of goods that makes the money they spend give the same extra happiness, or marginal utility, for each dollar spent. Other options are incorrect because This says ignore price; Lower price does not automatically mean you buy more.
Key Concepts
Optimal Purchase Combinations
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Deep Dive: Optimal Purchase Combinations
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Definition
Optimal purchase combinations refer to the most efficient mix of goods a consumer can buy based on marginal utility per dollar. By comparing the marginal utility of different goods to their prices, consumers aim to maximize total utility within budget constraints. Understanding optimal purchase combinations helps individuals make rational consumption choices.
Topic Definition
Optimal purchase combinations refer to the most efficient mix of goods a consumer can buy based on marginal utility per dollar. By comparing the marginal utility of different goods to their prices, consumers aim to maximize total utility within budget constraints. Understanding optimal purchase combinations helps individuals make rational consumption choices.
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