A Consumer Currently Spends a Given Budget on Two Goods

question 29

Multiple Choice

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 8. The unit price of X is $5 and the unit price of Y is $2. The utility-maximizing rule suggests that this consumer should

• A)increase consumption of product X and decrease consumption of product Y.
• B)increase consumption of product X and increase consumption of product Y.
• C)increase consumption of product Y and decrease consumption of product X.
• D)stick with the current consumption mix because it yields maximum utility.

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Definitions:

Compelling

Highly interesting or attractive in a way that draws attention.

Recurrent

Occurring repeatedly or periodically. This can refer to events, phenomena, or conditions that happen over and over again.

Daily Life

Activities and experiences that constitute a person's regular routine and existence.

Biological Views

Perspectives in science that emphasize the importance of physiological and genetic factors in understanding human behavior and mental processes.