T-shirt, of 22 is exactly twice the marginal utility of the sixth movie, which is 11. At this choice, the marginal

utility per dollar is the same for both goods. This is a tell-tale signal that José has found the point with highest

total utility.

We can write this argument as a general rule: If you always choose the item with the greatest marginal utility

per dollar spent, when your budget is exhausted, the utility maximizing choice should occur where the

marginal utility per dollar spent is the same for both goods.

A sensible economizer will pay twice as much for something only if, in the marginal comparison, the item

confers twice as much utility. Notice that the formula for the table above is:

The following Work It Out feature provides step by step guidance for this concept of utility-maximizing choices.

WORK IT OUT

Maximizing Utility

The general rule,

, means that the last dollar spent on each good provides exactly the same
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