Question

Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys Group of answer choices four times as many CDs as magazines. four times as many magazines as CDs. both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased. both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.

Answer 1

both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.

Step-by-step explanation:

The marginal utility of goods and services is the additional satisfaction that a consumer derives from consuming or buying an additional unit of a good or service.

In Economics, the law of diminishing marginal utility states that as the unit of a good or service consumed by an individual increases, the additional satisfaction he or she derives from consuming additional units would start decreasing or diminishing as the units of good or service consumed increases.

In this scenario, Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.