Consider an individual with preferences over two goods. This consumer is maximising utility when: They receive the same utility from each good. They spend the same amount of money on each good. The MRS is greater than the ratio of the prices of the two goods. Correct! None of the above
Question
Consider an individual with preferences over two goods. This consumer is maximising utility when: They receive the same utility from each good. They spend the same amount of money on each good. The MRS is greater than the ratio of the prices of the two goods. Correct! None of the above
Solution
The consumer is maximizing utility when the Marginal Rate of Substitution (MRS) is equal to the ratio of the prices of the two goods. The MRS is the rate at which a consumer is willing to trade off one good for another while maintaining the same level of utility. If the MRS is equal to the price ratio, it means the consumer is getting the most utility possible given their budget constraint. Therefore, the correct answer is "The MRS is equal to the ratio of the prices of the two goods."
Similar Questions
When a person consumes two goods (A and B), that person's utility is maximized when the budget is allocated such that:Group of answer choicesthe marginal utility of A equals the marginal utility of B.the marginal utility of A times the price of A equals the marginal utility of B times the price of Bthe ratio of total utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.the ratio of the marginal utility of A to the price of A equals the ratio of the marginal utility of B to the price of B.
. Utility maximization- the case of one commodity
A consumer with a limited income will maximize utility when each good is purchased in amounts such that theMultiple Choicetotal utility is the same for each good in a bundle.marginal utility of each good in a bundle is maximized.marginal utility per dollar spent on each of the final choices in a bundle is equal.marginal utility per dollar spent on each of the final choices in a bundle is maximized for each good.
For a consumer, the marginal utility of good A is 25 and its price is $5. The marginal utility of good B is 60 and its price is $12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer
state 10 significance of utility maximization
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