lose 23 utils from two fewer movies, so we would end up with less total utility at point R.

In short, the general rule shows us the utility-maximizing choice, which is called the consumer equilibrium.

There is another equivalent way to think about this. We can also express the general rule as the ratio of the

prices of the two goods should be equal to the ratio of the marginal utilities.When we divide the price of good 1

by the price of good 2, at the utility-maximizing point this will equal the marginal utility of good 1 divided by

the marginal utility of good 2.

Along the budget constraint, the total price of the two goods remains the same, so the ratio of the prices does

not change. However, the marginal utility of the two goods changes with the quantities consumed. At the

optimal choice of one T-shirt and six movies, point S, the ratio of marginal utility to price for T-shirts (22:14)

matches the ratio of marginal utility to price for movies (of 11:7).
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