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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

The marginal utility of good A is 4 utils, and its price is $2. The marginal utility of good B is 6 utils, and its price is $1. Is the individual consumer maximizing (total) utility if she spends a total of $3 by buying one unit of each good? If not, how can more utility be obtained?

To determine

The utility maximization.

Explanation

According to the utility maximizing rule, in a two good world, the consumer equilibrium occurs at the point where the marginal utility–price ratio for one of the goods is equal to the ratio for the other good. It can be represented as follows:

MUAPA=MUBPB (1)

Here,

MUA is 4.

MUB 6.

PA is $2

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