Question

Ben is exhausting his income consuming products A and B in such quantities that MUA/PA = 8 and MUB/PB = 6. Ben should purchase

1) More of product A
2) More of product B
3) Equal quantities of product A and B
4) Cannot be determined

Answer 1

A rational consumer should purchase more of product A as its marginal utility per unit of income is higher than that of product B.

Step-by-step explanation:

A rational consumer would only purchase additional units of a product as long as the marginal utility exceeds the opportunity cost. In this case, Ben is consuming products A and B in quantities such that the marginal utility of A per unit of income (MUA/PA) is 8, whereas the marginal utility of B per unit of income (MUB/PB) is 6. When the marginal utility per unit of income is higher, it indicates that the consumer is getting more satisfaction or utility from the good per dollar spent. Therefore, Ben should purchase more of product A as its marginal utility per unit of income is higher than that of product B.