If a Consumer Buys Two Goods, the Rational Spending Rule

question 55

Multiple Choice

If a consumer buys two goods, the rational spending rule requires that the:

• A)total expenditure on the two goods be equal.
• B)ratio of total utility to price be equal for the two goods.
• C)ratio of average utility to price be equal for the two goods.
• D)ratio of marginal utility to price be equal for the two goods.

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Definitions:

Stock Volatility

This is a measure of the fluctuation in the price of a stock over time, indicating the security's stability or instability.

Time To Expiration

The period remaining until the expiration date of a financial instrument, such as an option or futures contract.

Exercise Price

The price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset or security.

Stock Price

The cost of purchasing a share of a company's stock, representing the market's valuation of a single share of that company.