The MU/P Ratio for Good X Is Greater Than the MU/P

question 159

Multiple Choice

The MU/P ratio for good X is greater than the MU/P ratio for good Y as a result of a fall in the price of good X. To achieve consumer equilibrium, the consumer reallocates dollars from the purchase of good Y to the purchase of good X. In the process, she

• A)puts downward pressure on prices.
• B)maximizes total utility.
• C)acts according to the law of demand.
• D)b and c
• E)none of the above

---

Definitions:

Indifference Curve

A graph representing combinations of goods among which a consumer is indifferent, showing preference levels.

Bundle

A collection of items or services offered together as a single package.

Satisfaction

The fulfillment or gratification of a desire, need, or appetite; a measure of utilities or happiness obtained from consuming goods or services.

Marginal Rate

The rate at which something changes as the amount of that something increases or decreases, often used in the context of tax, referring to the rate applied to the last dollar earned.