Define utility maximizing rule

Economics Dec 17, 2020

Define utility maximizing rule.

Expert Solution

The utility maximizing rule states that a customer will allocate his dollars so that all of his goods provide him with equal utility. The formula for the rule is as follows:

MUx/Px = MUy/Py

Where:

MUx = the marginal utility derived from good x

Px = the price of good x

MUy = the marginal utility of good y

Py is the price of good y

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