Why is a consumer's satisfaction maximized when the marginal benefit from the last dollar spent on one good is equal to the marginal benefit from the last dollar spent on another good?
What will be an ideal response?
The marginal benefit from each additional dollar spent should be equal across various goods in order to maximize overall well-being. If these marginal units (last units) of satisfaction are not equal, then the consumer can be made better off by shifting consumption toward the good that yields more satisfaction at the margin. Hence, equilibrium occurs at the point where satisfaction from the last dollar spent is equal for all goods. This is the reasoning behind the old phrase "getting the most bang for the buck."
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Waldo buys only two items, pretzels and ham sandwiches. Waldo has $24 in income, pretzels cost $0.60 per bag and ham sandwiches cost $2.40 each. Which of the following statements is TRUE for the information given above?
A) Waldo's real income expressed in terms of pretzels is 40 bags of pretzels. B) Waldo's real income expressed in terms of ham sandwiches is 10 ham sandwiches. C) The relative price of a ham sandwich in terms of pretzels is 4 bags of pretzels per ham sandwich. D) All of the above answers are correct.
Strikes occur in about ________ percent of the labor-management negotiations
A) 2 B) 25 C) 64 D) 99