Question

Assume that product Alpha and product Beta are both priced at $1 per unit and that Ellie has $20 to spend on Alpha and Beta. She buys 8 units of Alpha and 12 units of Beta. The marginal utility of Alpha is 40 and the marginal utility of Beta is 20. This indicates that _________.
a. Ellie should make no change in consumptionb. Given another dollar, Ellie should buy an additional unit of Betac. In order to maximize utility, Ellie should buy more of Beta and less of Alphad. In order to maximize utility, Ellie should buy more of Alpha and less of Beta

Answer 1

Answer: In order to maximize utility, Ellie should buy more of Alpha and less of Beta

Explanation: Marginal utility is the quantity of added satisfaction that a consumer enjoyed from consuming additional units of goods or services. Marginal utility is the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service. However, in determining how much of an item consumers are willing to purchase marginal utility is used.