Question

Assume a consumer can buy two goods, A and B, and that the prices are Pa and Pb respectively. The marginal utility of A is MUa and that of B is MUb. Which of the following expressions represents consumers' optimum utility maximization?

a. MU=MUbb. MUa × PA=MUb × Pbc. Pa/Pb=MUa/MUbd. PA × PB=MUa × Mube. MUa/MUb

Answer 1

(c) MUa/Pa = MUb/Pb

Step-by-step explanation:

The Utility Maximization Rule is

MUa/Pa = MUb/Pb, where MUa represents the marginal utility derived from good a, Pa represents the price of good a, MUb represents the marginal utility of good b and Pb represents the price of good b.