Question

Which statement best describes how a consumer decides on spending to get maximum satisfaction?

Options

• Spending on the most expensive product

• Dividing money equally between goods

• Making sure the last rupee spent on each good gives equal utility

• Spending more on the least useful good

Answer 1

Making sure the last rupee spent on each good gives equal utility

Explanation:

Maximum satisfaction is reached when the last rupee spent on each good gives the same marginal utility.