Answer to Question #323792 in Microeconomics for rubaiya

Question

Explain why equalizing the marginal utilities of all good does not maximize utility. Explain why equalizing the marginal utility per pound spent on each good does maximize utility.

Answer 1

It is connected to the fact, that marginal utilities without price describes only the whole quantity of product, which can not demonstrate it quality. So product cannot be compared without casting them to the one quantity on price. To say more utility evaluation is inseparable from the chain of purchased goods.