Suppose a customer who purchases only two goods is making a utility-maximizing choice and then the price of one of the goods decreases. What will happen? A. The consumer's purchasing power will increase B. The consumer's total utility will increase C. The consumer's money income will increase Choose the most appropriate answer from the options given below:
A and B only
A price fall raises the purchasing power of an unchanged money income and expands the feasible consumption set. For a consumer purchasing the goods under the usual nonsatiation assumption, maximum attainable utility rises; money income itself does not.
Important Questions from Utility analysis
Utility derived from consumption of an additional unit of a good is called
Which of the following statements is true?
The word ‘marginal’ means _____.
The law of diminishing marginal utility was propagated by:
- Ordinal utility analysis of the consumer's behaviour is considered superior to the cardinal utility analysis mainly due to
