How Do Consumers Maximise Total Utility Within Their Budget Constraint

question 207

Multiple Choice

How do consumers maximise total utility within their budget constraint?

• A)By buying the cheapest goods they can find.
• B)By buying whatever they like the best.
• C)By buying the goods with the largest marginal utility per dollar spent.
• D)By spending the same dollar amount for each good.

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Definitions:

Risk Averse

describes a preference for avoiding risk, where individuals opt for the option with the least uncertainty in outcomes or potential losses.

Subjective Measure

A type of data collection or evaluation based on personal opinions, interpretations, points of view, emotions, and judgment.

Present Value

The present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Interest

The cost of borrowing money, typically expressed as a percentage rate over the period of the loan, or the return earned on investments.