Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The total income available
B
The marginal cost of each good
C
The average utility derived from all goods
D
The total expenditure planned
Understanding the Answer
Let's break down why this is correct
Answer
To maximize their utility within a fixed budget, a consumer needs to look at the marginal benefit of each good they want to buy. The marginal benefit is the additional satisfaction or happiness gained from consuming one more unit of a good. The consumer should compare this marginal benefit to the price of the good, which is the cost of buying that extra unit. For example, if a consumer finds that the extra satisfaction from one more slice of pizza is greater than the price of that slice, then it makes sense to buy it. Ultimately, they should keep buying goods until the marginal benefit equals the price, ensuring they get the most satisfaction for their money.
Detailed Explanation
To get the most satisfaction, a consumer should look at how much extra happiness each good gives compared to its cost. Other options are incorrect because Some might think that just knowing how much money you have is enough; People might believe that looking at the average happiness from all items is helpful.
Key Concepts
utility maximization
marginal benefit
budget constraints
Topic
Optimization in Microeconomics
Difficulty
hard level question
Cognitive Level
understand
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