Question

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MUA/PA) is .6 and the marginal utility per dollar spent for good B (MUB/PB) is 1. To increase utility with the same amount of money, Paul should:________.

Answer 1

Answer: increase the number of B consumed and decrease the number of A consumed.

Explanation: Marginal utility could be explained as the additional or extra satisfaction or benefit derived from the consumption of more moreover unit of a particular good rate service.

Marginal utility of per dollar spent on good A = 0.6

Marginal utility per dollar spent on good B = 1.0

Therefore, to increase utility with the same amount of money, Paul should increase the number of B consumed, as it has a greater utility per dollar coefficient than consumption of good A which has a lower Marginal utility coefficient.