Suppose that Fiona spends all of her income on 10 units of good X and 14 units of good Y. Fiona's...
Question:
Suppose that Fiona spends all of her income on 10 units of good X and 14 units of good Y. Fiona's marginal utility from the 10th unit of good X is 24 utils, and her marginal utility from the 14th unit of good Y is 20 utils. If the price of good X is $8 per unit and the price of good Y is $5 per unit, then to comply with the rational spending rule, Fiona should:
a. purchase more than 10 units of good X and less than 14 units of Y.
b. purchase less than 10 units of good X and more than 14 units of good Y.
c. purchase more than 10 units of good X and more than 14 units of good Y.
d. continue to purchase 10 units of good X and 14 units of good Y.
Marginal Utility:
The marginal utility tells us the consumer's change in overall satisfaction when it consumes the last product. A positive marginal utility means that the consumer receives benefits from the product and a negative marginal utility means that the consumer received dissatisfaction from the good.
Answer and Explanation: 1
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View this answer- The correct answer is Option B.
Let us determine the marginal utility-price ratio for each goods. The formula is:
{eq}Marginal\:utility\:price\:ratio...
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What is Marginal Utility? - Definition, Theory, Formula & Example
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Learn about marginal utility and how it is calculated. Explore the basics of marginal utility, the marginal utility equation, and how it is applicable in economics.
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