Billie spends all of her income on soccer balls and jeans, and the price of a pair of jeans is three times the price of soccer balls. In order to maximize total utility, Billie should a. buy three times as many soccer balls as pairs of jeans. b. buy both items until the marginal utility of a pair of jeans is three times the marginal utility of soccer balls. c. buy three times as many pairs of jeans as soccer balls. d. buy both items until the marginal utility of soccer balls is three times the marginal utility of a pair of jeans.

Question

Maximo Cohen

Business

30 April, 01:56

Billie spends all of her income on soccer balls and jeans, and the price of a pair of jeans is three times the price of soccer balls. In order to maximize total utility, Billie should a. buy three times as many soccer balls as pairs of jeans. b. buy both items until the marginal utility of a pair of jeans is three times the marginal utility of soccer balls. c. buy three times as many pairs of jeans as soccer balls. d. buy both items until the marginal utility of soccer balls is three times the marginal utility of a pair of jeans.

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Answers (1)

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Dallas Case · Answer 1

The correct answer is letter "B": buy both items until the marginal utility of a pair of jeans is three times the marginal utility of soccer balls.

Explanation:

Marginal utility refers to the additional benefit or satisfaction gained from consuming one more unit of a good or service. To maximize marginal utility, every amount of money spent must represent the same amount of satisfaction for the consumer according to the value that good or service has.

In that sense, to maximize the marginal utility on Billie's purchase, the satisfaction gotten from the pair of jeans must be the same number of times as its value, and the satisfaction gotten from the soccer balls must be the same time as their value represent.