If the price of Good A falls, then when will the consumer make their new utility-maximizing choice?
A) When the marginal utility from consuming Good A is lower than before.
B) When the quantity consumed of all other goods increases.
C) When the marginal utility from all other goods is lower than before.
D) When the quantity of Good A consumed decreases.
Utility Maximization refers to the decision of consumer through which the consumer spent the last unit of money is worth to the units consumed. With the given income and prices, consumer allocates the income and purchases the goods that yield the maximum level of satisfaction.
Answer and Explanation: 1
Option (a) is correct.
If the price of good A falls, it will lead to an increase in the consumption of good A. According to the law of diminishing...
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fromChapter 3 / Lesson 2
Learn about utility maximization. Discover various types of utility, examine utility maximizing rules, and study examples of maximizing utilities in economics.