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Purchasing behavior

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Given three goods with the symbols, 'x', 'y', and 'z', each with respective prices. Additionally, you also have budget or money income denoted as 'I' that combination of goods that will maximize the individual's utility.

Discuss how an individual would change his purchasing behavior, if at the current bundle the MUx/Px > MUy/Py = MUz/Pz. Why?

(Response to this question is mandatory and will account for 5% of your total score).

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Solution Summary

Purchasing behavior and marginal utility is examined.

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When the marginal utility per dollar of consuming one good is greater than it is for another good, a rational person will shift toward that good. For example, if you discover a new flavor of ice cream, suddenly you may ...

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