Suppose Sally Allocates Her Budget Between Two Goods, a and B

question 126

Multiple Choice

Suppose Sally allocates her budget between two goods, A and B. She spends her entire income on a combination of A and B, for which the ratio of marginal utility of good A to its price exceeds the ratio of marginal utility of good B to its price. She can increase her total utility by buying:​

• A)more A and less B.
• B)more B and less A.
• C)more A without changing her consumption of B.
• D)less B without changing her consumption of A.
• E)more B and more A.

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Definitions:

Investigate

the action of carrying out research or systematic inquiry to discover facts or information about a subject, often involving the collection of evidence.

Human Behaviour

The range of actions, conduct, and responses exhibited by humans, influenced by culture, attitudes, emotions, values, ethics, and the external environment.

Free Will

The concept that humans have the ability to make choices that are not pre-determined by past events or natural laws.

External Stimuli

Environmental or outside factors that provoke a response from sensory systems or influence behavior and perceptions.