Question

Suppose a consumer is spending his or her entire budget. In order to obtain the most satisfaction from his or her purchases, all goods should:

1) provide the same marginal utility per dollar.
2) be consumed in equal quantities.
3) have identical marginal utilities.
4) give the consumer matching amounts of total utility.

Answer 1

The most satisfaction is obtained when goods provide the same marginal utility per dollar, which is key for consumer equilibrium on the budget line. Option 3.

Step-by-step explanation:

To achieve the maximum satisfaction from purchases while spending an entire budget, a consumer should ensure that all goods provide the same marginal utility per dollar (3). This means choosing items with the highest marginal utility per dollar spent, leading to a consumer equilibrium on the budget line where the highest satisfaction is obtained when the marginal utility per dollar is equalized across all goods. The idea of diminishing marginal utility suggests that each additional unit of a good consumed provides less utility than the previous one, making the equality of marginal utility per dollar even more crucial for maximizing satisfaction.