In the theory of the consumer behavior, a consumer is said to maximize utility when

  • A Marginal utility of a commodity is equal to the price paid for it
  • B Marginal utility of a commodity X is equal to the price of commodity Y
  • C Average utility of a commodity is equal to the price paid for it
  • D Total utility of a commodity is equal to the price paid for it
jamb 2016economics

The correct answer is A. Marginal utility of a commodity is equal to the price paid for it

MUx/Px = MUy/Py, where MUx is the marginal utility derived from good x, Px is the price of good x, MUy is the marginal utility of good y and Py is the price of good y. A consumer should spend his limited money income on the goods which give him the most marginal utility per dollar. Only when the ratio of MU/P is equal for all goods is a consumer maximizing his total utility.

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