The algebraic expression of the utility-maximizing rule for two products, A and B, is what?
Explanation
This algebraic formula is the precise mathematical statement of the utility-maximizing rule. It ensures that a consumer allocates their budget to get the maximum possible satisfaction by equalizing the marginal utility per dollar across all purchased goods.
Other questions
What is the primary principle upon which the simplest theory of consumer behavior is based?
According to the example in the textbook concerning tacos, if a consumer gets 10 utils from the first taco, what happens to the marginal utility with the second taco?
What is the definition of total utility?
According to the utility-maximizing rule, a consumer allocates their income so that the last dollar spent on each product yields what?
In the example of Holly choosing between apples at $1 and oranges at $2, if she has $10 to spend, what is the utility-maximizing combination of goods?
What does the diamond-water paradox illustrate?
What is the income effect of a price change?
Why do consumers generally prefer cash gifts to noncash gifts of equal monetary value?
In the Appendix on Indifference Curve Analysis, what does a budget line show?
What does the slope of an indifference curve measure?
Why must a consumer's equilibrium position be a point of tangency between the budget line and an indifference curve?
What does the term 'utility' in economics refer to?
In the example from Figure 7.1, at what point does the marginal utility of consuming a taco become zero?
To be able to apply the utility-maximizing rule, what must a consumer do with the marginal utilities of differently priced goods?
In the appendix example, if a consumer has an income of $12 and Product A costs $1.50 while Product B costs $1.00, what is the slope of the budget line?
Why is an indifference curve typically convex to the origin?
What is the 'full price' of a good or service when accounting for the value of time?
In the appendix, what is an indifference map?
Why do economists assume 'rational behavior' on the part of the consumer?
In deriving Holly's demand curve for oranges, what happens to her quantity demanded when the price of oranges falls from $2 to $1?
What are the four dimensions assumed for the typical consumer in the theory of consumer behavior?
What is consumer equilibrium?
According to the table in Figure 7.1, if a consumer has consumed 3 tacos, what is their total utility?
Using the data for Holly in Table 7.1, what is the marginal utility per dollar of the second apple if the price is $1?
What is the substitution effect of a price change?
In the appendix, why do indifference curves never cross?
What happens to a consumer's budget line if their money income increases, assuming prices of goods A and B remain constant?
In the section on Medical Care Purchases, why does having health insurance lead people to consume more medical care than if they faced the full price?
In the 'Consider This' box on vending machines, why do newspaper publishers use dispensers that allow access to the full stack of papers, while soft-drink sellers do not?
If a consumer is at a point on their budget line that is not tangent to an indifference curve but instead intersects it, what should they do to increase total utility?
The theory of consumer behavior explains that consumers will buy additional units of a product only if its price falls. What is the underlying reason for this?
What does a negative income-elasticity coefficient designate, according to the applications section of the preceding chapter that this one builds on?
In the appendix, what is the relationship between the marginal rate of substitution (MRS) and the ratio of marginal utilities (MUB/MUA) at the equilibrium point?
According to the appendix, what is the effect on the budget line if the price of the good on the horizontal axis (Product B) decreases, while income and the price of the good on the vertical axis (Product A) remain constant?
Considering the data in the table for Figure 7.1, what is the marginal utility of the fourth taco consumed?
Which statement best describes the relationship between the price of a product and total utility?
If a consumer is following the utility-maximizing rule and consuming two goods, A and B, where the price of A is $3 and the price of B is $6, what must be true of their marginal utilities at the equilibrium point?
In the appendix, why does an indifference curve slope downward?
In the example of Holly choosing between apples and oranges, how is her demand curve for oranges derived?
Which of the following is NOT one of the three characteristics of utility mentioned in the chapter?
In the example from the appendix where the consumer has an income of $12, the price of product A is $1.50, and the price of product B is $1.00, what is the maximum number of units of Product A the consumer can purchase?
A new product like the iPod succeeds in the marketplace because it:
If a consumer is in equilibrium, and the price of one good falls, what is the immediate effect?
In the appendix, at the point of consumer equilibrium, what is the relationship between the slope of the budget line and the slope of the indifference curve?
How does the theory of consumer behavior account for the fact that a corporate executive might fly from Pittsburgh to Chicago while a retiree drives?
If a consumer buys a new product, what does this imply about its effect on their total utility?
At the point of equilibrium in the indifference curve model, what does the equality MRS = PB/PA signify?
In Table 7.1, Holly has a budget of $10. Apples (A) cost $1 and oranges (B) cost $2. She has already purchased 1 apple and 3 oranges, spending $7. Her MU/P for the next apple is 8 and for the next orange is 8. What should she do next?
What happens to the marginal utility of water as more is consumed, and how does this relate to its price in the diamond-water paradox?