Author Question: If MUa/Pa is greater than MUb/Pb, and the consumer is consuming both goods, the consumer is not ... (Read 41 times)

CQXA · **on:** Jul 1, 2018

If MUa/Pa is greater than MUb/Pb, and the consumer is consuming both goods, the consumer is not maximizing utility. True or false. Explain.

What will be an ideal response?

Question 2

Refer to Scenario 2.1. If P = 15, which of the following is true?

A) Quantity supplied is greater than quantity demanded.
B) Quantity supplied is less than quantity demanded.
C) Quantity supplied equals quantity demanded.
D) There is a surplus.

irishcancer18 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

True, when the consumer has maximized utility, the marginal utility per dollar spent on each good purchased will be equal, and the consumer will be on her budget line. In this case, the consumer should consume more a and less b.

Answer to Question 2

B