📚 Learning Guide
Utility Maximization After Price Change
medium

If the price of oranges increases but the marginal utility per dollar spent remains higher than that of apples, consumers will always choose to buy more apples instead of oranges.

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Learning Path
Learning Path

Question & Answer
1
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3
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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

When the price of oranges goes up, consumers have to think about how to spend their money wisely. Marginal utility is the extra satisfaction or happiness someone gets from consuming one more unit of a product, like an orange or an apple. If the marginal utility per dollar for oranges is still higher than for apples, it means that even with the higher price, oranges still give more satisfaction for each dollar spent. However, if consumers find that the overall satisfaction they get from apples is better than from oranges when factoring in the price increase, they may choose to buy more apples instead. For example, if oranges cost more but still give less satisfaction per dollar spent than apples, a consumer will prefer to buy apples to maximize their happiness.

Detailed Explanation

Consumers will not always choose apples. Other options are incorrect because This answer suggests that price alone decides what people buy.

Key Concepts

Utility Maximization
Price Elasticity
Consumer Choice Theory
Topic

Utility Maximization After Price Change

Difficulty

medium level question

Cognitive Level

understand

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