A Little Math We can state the rule of consumer optimum in algebraic terms by examining the ratio of marginal utilities and prices of individual products. The rule simply states that a consumer maximizes personal satisfaction when allocating money income in such a way that the last dollars spent on good A, good B, good C, and so on, yield equal amounts of marginal utility. Marginal utility (MU) from good A is indicated by "MU of good A." For good B, it is "MU of good B." Our algebraic formulation of this rule, therefore, becomes

The letters A, B,..., Z indicate the various goods and services that the consumer might purchase. We know, then, that in order for the consumer to maximize utility, the marginal utility of good A divided by the price of good A must equal the marginal utility of any other good divided by its price. Note, though, that the application of the rule of equal marginal utility per dollar spent does not necessarily describe an explicit or conscious act on the part of consumers. Rather, this is a model of consumer optimum. shopping.

Navigation: Go to Amazon.com website. Select to browse the Books section. Application: PRIVATE L. A., by James Patterson was a New York Times best selling book. Find the price of this paperback book and the price of your class textbook (Miller, R.L., (2018). Economics Today with MyEconLab Access Code, 19e. Pearson). Using the prices you recorded for the two books, suppose an individual purchased both the number one book and the class text through Amazon.com. Using the equation in the A Little Math section, what does knowing the prices of the 2 books tell you about the MU of the 2 books to the person that bought them. You do not have enough information to determine what the MU is for either book, but you can say what the relative MU of the 2 books is to the person buying them based on the equation. Why do you think the MU of text would be higher, lower, or the same as the novel.