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suppose you are consuming two goods, a and b. your marginal utility from good a is 22 while your marginal utility from good b is 4. in addition, good a costs $11.00 each and good b costs $2.25 each. a. according to the utility-maximizing rule, you are not maximizing your total utility . b. you should consume:

Answer :

azikennamdi

According to the utility-maximizing rule, one is not maximizing their total utility. They should consume more of goods A and less of goods B.

What is the explanation for the above result?

Remember that when the marginal utility gained from the final dollar spent on both commodities is equal, overall satisfaction is maximized.

Mu/good price = marginal utility per dollar

Note that MU Per dollar of good A = 22/ 2

Hence given us: 2 Utils.

Mu per dollar of goods B on the other hand is:
4/2.25

= 1.77 Utils.

Since Good A provides more utility, from a rational point of view, more of Good A should be consumed and less of good B.

In economics, utility is defined as the enjoyment or value gained from using a thing. The marginal utility of an item or service reflects how much pleasure or satisfaction customers acquire as a result of a one-unit increase or reduction in consumption.

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