[amp_mcq option1=”$$\\frac{{MUx}}{{MUy}} = \\frac{{MUy}}{{MUz}} = \\frac{{MUz}}{{MUx}}$$” option2=”$$\\frac{{MUx}}{{MUy}} = \\frac{{Px}}{{Py}} = \\frac{{MUx}}{{Pz}}$$” option3=”$$\\frac{{MUx}}{{Px}} = \\frac{{MUy}}{{Py}} = \\frac{{MUz}}{{Pz}}$$” option4=”$$\\frac{{MUx}}{{Py}} = \\frac{{MUy}}{{Pz}} = \\frac{{MUz}}{{Px}}$$” correct=”option3″]<\/p>\n
The correct answer is C.<\/p>\n
The law of diminishing marginal utility states that as a consumer consumes more of a good, the marginal utility (MU) of that good decreases. This means that each additional unit of the good provides less satisfaction than the previous unit.<\/p>\n
The consumer’s satisfaction is maximized when the marginal utility of each good is equal to the price of that good. This is because the consumer is getting the same amount of satisfaction from each good, and is not wasting any money on goods that provide less satisfaction than their price.<\/p>\n
In mathematical terms, this can be expressed as:<\/p>\n
$$\\frac{{MUx}}{{Px}} = \\frac{{MUy}}{{Py}} = \\frac{{MUz}}{{Pz}}$$<\/p>\n
where $MUx$ is the marginal utility of good $x$, $Px$ is the price of good $x$, $MUy$ is the marginal utility of good $y$, $Py$ is the price of good $y$, and $MUz$ is the marginal utility of good $z$.<\/p>\n
Option A is incorrect because it does not take into account the prices of the goods. Option B is incorrect because it does not take into account the marginal utilities of the goods. Option D is incorrect because it does not take into account the prices of the goods.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”$$\\frac{{MUx}}{{MUy}} = \\frac{{MUy}}{{MUz}} = \\frac{{MUz}}{{MUx}}$$” option2=”$$\\frac{{MUx}}{{MUy}} = \\frac{{Px}}{{Py}} = \\frac{{MUx}}{{Pz}}$$” option3=”$$\\frac{{MUx}}{{Px}} = \\frac{{MUy}}{{Py}} = \\frac{{MUz}}{{Pz}}$$” option4=”$$\\frac{{MUx}}{{Py}} = \\frac{{MUy}}{{Pz}} = \\frac{{MUz}}{{Px}}$$” correct=”option3″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-43604","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n