Will comparing marginal utility divided by price for different goods indicate allocative efficiency? Yes or no,...

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Will comparing marginal utility divided by price for different goods indicate allocative efficiency? Yes or no,...

Will comparing marginal utility divided by price for different goods indicate allocative efficiency? Yes or no, why or why not?

business economics

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Answer 1

Answer #1

Yes

From consumer point of view, when marginal utility per dollar from last dollar from all the goods are same then it means consumer is at equilibrium. This is also known as law of equi marginal utility

However it is not allocative efficient in production

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Answer 2

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Will comparing marginal utility divided by price for different goods indicate allocative efficiency? Yes or no,...