Wednesday, August 10, 2011

Consumer choices with regard to bundles?

No, the consumer has not picked the best bundle. Utility would be maximized if the marginal utility PER DOLLAR of each good is identical. This consumer receives 5 units of marginal utility per dollar from good X, but 10 units of marginal utility per dollar from good Y. Since good Y gives more marginal utility per dollar, the consumer could increase total utility by increasing Y and dcreasing X.

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