Question

Which of the following is an assumption of the decision-making process followed by consumers to maximize...

Which of the following is an assumption of the decision-making process followed by consumers to maximize utility?

Multiple Choice

  • Marginal utility always increases as more units of a good are consumed.

  • The consumer oftentimes is not sure about her preferences.

  • The consumer’s income increases as prices of goods increase.

  • The consumer considers the prices of the products.

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Answer #1

Answer - The consumer considers the prices of the products.

Reason - While Making decision to maximise utility the consumer is assumed to be having a limited income and with that limited income he ranks the alternatives as per his preference of highest to lowest utility.

The consumer compares the prices with the utility he derives from the good and chooses the alternative which provides maximum price to utility ratio.

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