Question

Suppose you have a monthly entertainment budget that you use to rent movies and purchase cds. you currently use your income to rent 5 movies per month at a cost of​ $5.00 per movie and to purchase 5 cds per month at a cost of​ $10.00 per cd. your marginal utility loading... from the fifth movie is 3030 and your marginal utility from the fifth cd is 5050. are you maximizing​ utility? you are

Answer 1

You are not maximizing utility, because the marginal utility per dollar spent renting movies is not equal to the marginal utility per dollar spent on​ CDs. We will maximizing utility when the consumers decide to allocate their money incomes so that the last dollar spent on each product purchased yields the same amount of extra marginal utility.