If MU x /P x

Question

If MU x /P x   < MU y /P y , thenA)  spending a dollar less on Y and a dollar more on X increases utility.B)  spending a dollar less on X and a dollar more on Y increases utility.C)  X is more expensive than Y.D)  Y is more expensive than X.

Nadia AlHammadi · Accepted Answer

Final Answer : B, Explanation :  The given inequality suggests that the marginal utility per dollar spent on Y (MU y /P y ) is greater than that for X (MU x /P x ). This implies that reallocating spending from X to Y (spending a dollar less on X and a dollar more on Y) would increase the overall utility, as you get more utility per dollar spent on Y compared to X.

If MU_x/P_x < MU_y/P_y, then

A) spending a dollar less on Y and a dollar more on X increases utility.
B) spending a dollar less on X and a dollar more on Y increases utility.
C) X is more expensive than Y.
D) Y is more expensive than X.

Definitions

Learning Objectives

Learning Objectives

Related questions

If MUx/Px < MUy/Py, thenA) spending a dollar less on Y and a dollar more on X increases utility.B) spending a dollar less on X and a dollar more on Y increases utility.C) X is more expensive than Y.D) Y is more expensive than X.

Definitions

Learning Objectives

Learning Objectives

Related questions

If MU_x/P_x < MU_y/P_y, then

A) spending a dollar less on Y and a dollar more on X increases utility.
B) spending a dollar less on X and a dollar more on Y increases utility.
C) X is more expensive than Y.
D) Y is more expensive than X.