Question

Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa = 6 and MUb/Pb = 4. Ben should purchase:A) more of A and less of B.B) more of B and less of A.C) more of both A and B.D) less of both A and B.

Answer 1

Answer:

Option (a) is correct.

Explanation:

Given the marginal utility per dollar for the two products as follows:

$\frac{MU_{a} }{P_{a} } =6$

$\frac{MU_{b} }{P_{b} } =4$

All the individuals wants to maximize their utility that is obtained from the consumption of goods. We can see that marginal utility per dollar of product A is higher than the marginal utility per dollar of product B which means that this consumer should purchase more quantity of product A and less quantity of product B.

It is going on until the point at which marginal utility per dollar of both the products becomes equal.