The optimal consumption rule for all goods requires the:

A) marginal utility of all goods consumed divided by their respective prices to be equal to the budget constraint.
B) marginal utility of all goods consumed to exceed the total utility of all goods.
C) marginal utility of all goods consumed divided by their respective prices to be equal.
D) prices of all goods to be equal.

Question

Patrick Gervenak · Accepted Answer

Final Answer : C, Explanation :  The optimal consumption rule, according to the principle of consumer equilibrium, states that for a consumer to maximize their utility given their budget, the ratio of the marginal utility of each good to its price should be equal across all goods. This ensures that the last unit of currency spent on each good provides the same amount of additional utility, leading to an optimal allocation of the consumer's budget.

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