Equimarginal Principle


Sounds like a pretty hungry consumer.

The example illustrates a key point, though. The "optimal" number of burgers and cokes is a combination such that the quotient

MU/P

is the same for each of the goods purchased. That is, a dollar gives the same marginal utility regardless which good it is spent on.

This is an instance of a very general principle in economics, called the equimarginal principle. It has many more applications of it in other parts of microeconomics.

Let's restate that precisely:

Equimarginal Principle (for maximization of utility)
In order to maximize the utility derived from a given income, it is necessary to allocate the spending among different goods and services in such a way that the marginal utility of each good or service consumed, divided by its price, is the same as the quotient of marginal utility divided by price for every other good consumed.
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