CAIE A-Level Economics 7.1.3 Equi-marginal principle

Practise applying the equi-marginal principle to consumer choices between goods with different prices and marginal utilities.

Exam points

use MU divided by price to identify the utility-maximising bundle of two goods
predict how a change in marginal utility or price alters a rational consumer's spending

[Maximum number: 1]

A consumer maximises his total utility by initially buying 10 units of good X and 10 units of good Y.

Assuming both goods are normal, what would cause this utility-maximising consumer to purchase more of good Y and less of good X ?

an increase in the marginal utility of good Y

an increase in the price of good Y

an increase in the tax on the consumption of good Y

an increase in the tax on the income of consumers

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7.1.3—Equi-marginal principle question 1