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The Utility Maximizing Rule States That "If MUX/PX = MUY/PY

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The utility maximizing rule states that "if MUX/PX = MUY/PY, then you're maximizing utility." Why is that so? How will the ratio of prices compare to the ratio of marginal utilities when you are maximizing your total satisfaction from a given amount of spending?


Definitions:

Referent Power

A form of influence that stems from the leader’s ability to be admired and respected, thus inspiring others to follow.

Expert Power

The influence and authority one has due to one's skills, experience, or knowledge in a particular area.

Coercive Power

The ability of a person to force others to comply with demands or obey orders through the threat of punishment or negative consequences.

Reward Power

The ability to influence others' behavior through the control of valued resources or rewards, a key aspect of leadership and organizational dynamics.

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