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Optimal Purchase Combinations
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Arrange the following steps to determine the optimal purchase combination for maximizing utility: 1) Calculate the marginal utility per dollar for each good, 2) Determine the consumer's budget constraint, 3) Compare the marginal utility per dollar across goods, 4) Choose the combination of goods that maximizes total utility within the budget.

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
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Choose AnswerChoose 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

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

Deep Dive: Optimal Purchase Combinations

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Definition
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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