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JAMB Economics 1997 Question 1

Question 1

Theory of Consumer Behaviour

With a given level of money income, a consumer maximizes satisfaction from the consumption of goods and services when the

  1. A.total utility derived from each good or service is increasing at an increasing rate
  2. B.marginal utility derived from each good or service is increasing at the same rate
  3. C.marginal utility derived per naira spent is the same for all the goods and services
  4. D.total utility derived from all the goods and services is large.
Show the answer and explanation

Answer: C (marginal utility derived per naira spent is the same for all the goods and services)

Explanation

This is the equi-marginal principle: if one good gave more utility per naira, switching spending to it would raise satisfaction, so the best point is where MU per naira is equal for all goods.