Assume that a consumer purchases a combination of products Y and Z and that the MUy/Py...

Assume that a consumer purchases a combination of products Y and Z and that the MU_y/P_y = 15 and MU_z/P_z = 18. To maximize utility, without spending more money, the consumer should

Expert Solution

Increase Consumption of good Z and decrease consumption of good Y.

Explanation :

Utility maximization rule is,

MUy/Py =MUx/Px

So, here marginal utility per dollar for good Z is higher than marginal utility per dollar for good y. So to equal, we should increase the consumption of good z and decrease consumption of good y.

Rahul Sunny answered 2 years ago

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