Answer to Question #307964 in Microeconomics for lydia

Question

The consumer is not choosing the best affordable (feasible) bundle of goods x and y. Explain why? MU_{y /}P_x MU_{y /}P_y

Answer 1

$\frac{MUx }{ MUy} = \frac{Px}{ Py}$

For optimal consumption the ratio of marginal utility to the price should be equal for the two goods and hence should satisfy the above condition.