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WAEC Economics 1997 Question 15

Question 15

Theory of Consumer Behaviour

For two commodities A and B, MA and MB are the respective marginal utilities while PA and PB are the respective prices. Marginal utilities of the two commodities are maximized when

  1. A.MA/PA = MB/PB
  2. B.MA/PA > MB/PB
  3. C.MA/PA < MB/PB
  4. D.PA/MA < PB/MB
  5. E.PA/MA > PB/MB
Show the answer and explanation

Answer: A (MA/PA = MB/PB)

Explanation

A consumer is in equilibrium when the marginal utility per naira is the same for both goods.