Which of following best describes how a consumer makes an optimal decision?

Choose 1 answer:
(A) Choose the combination of goods that gives the highest profit
(B) Choose the combination of goods that minimizes how much is spent
(c) Choose the combination of goods with the highest marginal utility
(D) Choose the combination of goods with the highest total utility
(E) Choose the optimal combination of goods subject to a budget constraint

Question

Which of following best describes how a consumer makes an optimal decision?

Choose 1 answer:
(A) Choose the combination of goods that gives the highest profit
(B) Choose the combination of goods that minimizes how much is spent
(c) Choose the combination of goods with the highest marginal utility
(D) Choose the combination of goods with the highest total utility
(E) Choose the optimal combination of goods subject to a budget constraint

Accepted Answer

∻Solution∻ ‖ a ⋮ Consumer Optimal Choice: The optimal decision for a consumer involves selecting a combination of goods that maximizes their utility given their budget constraint. ‖ ‖ b ⋮ Marginal Utility and Budget Constraint: Consumers look at the additional satisfaction (marginal utility) from consuming one more unit of a good, while ensuring that the total cost of their consumption bundle does not exceed their budget. The optimal consumption point is where the ratio of the marginal utilities to the prices of the goods is equal across all goods, and the consumer's budget is fully expended. This can be expressed as $\frac{MU_x}{P_x} = \frac{MU_y}{P_y}$, where $MU$ is the marginal utility and $P$ is the price of goods $x$ and $y$. ‖ ∻Answer∻ ⚹ (E) Choose the optimal combination of goods subject to a budget constraint ⚹ ∻Key Concept∻ ⚹ Optimal Consumer Decision-Making ⚹ ∻Explanation∻ ⚹ A consumer makes an optimal decision by choosing the combination of goods that maximizes their utility within the limits of their budget constraint. ⚹◊How does consumer decision-making impact overall market equilibrium in the context of Micro Economics?⍭ Generate me a similar question◊

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