Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
2 → 1 → 3 → 4
B
1 → 2 → 3 → 4
C
3 → 2 → 1 → 4
D
4 → 3 → 2 → 1
Understanding the Answer
Let's break down why this is correct
Answer
First, the consumer must figure out how much money they have and what that limits in terms of buying goods, which is the budget constraint. Next, they calculate the marginal utility per dollar spent on each good, showing how much extra satisfaction each dollar brings. Then, they compare those marginal utility‑per‑dollar numbers for all goods to see which gives the most benefit per dollar. Finally, they pick the mix of goods that gives the highest total utility while staying within the budget. For example, if apples give 10 MU for $1 and oranges give 8 MU for $1, the consumer would buy more apples until the marginal utility per dollar equalizes or the budget is exhausted.
Detailed Explanation
First you must know how much money you have, so the budget step comes first. Other options are incorrect because This order puts the calculation of marginal utility before knowing how much you can spend, so you might choose a good that costs more than your budget allows; It starts by comparing utilities before you even check your money, so you could compare a good you can’t afford.
Key Concepts
Optimal Purchase Combinations
Marginal Utility
Budget Constraints
Topic
Optimal Purchase Combinations
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1To maximize utility given a budget constraint, a consumer should allocate spending such that the marginal utility per dollar spent on each good is equal to the marginal utility per dollar spent on other goods. This principle is known as the __________.
mediumEconomics
Practice
2
Question 2When considering optimal purchase combinations, which of the following statements are true regarding consumer choices and utility maximization? Select all that apply.
hardEconomics
Practice
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