Question

Sarah is considered a rational consumer while she is spending "all" her lunch budget on either salad, tacos, or both salad and tacos. If Sarah, according to her budget and rational preferences, finds that salad and tacos are both normal goods to her, then which of the following will hold true?

Question 6 options:

	Sarah should demand more tacos and less salad as long as her marginal utility per dollar spent on salad is greater than her marginal utility per dollar spent on tacos.
	Sarah should demand less salad and more tacos as long as her marginal utility per dollar spent on salad is less than her marginal utility per dollar spent on tacos.
	Sarah should demand more from both salad and tacos as long as her marginal utility per dollar spent on salad is greater than her marginal utility per dollar spent on tacos.
	Sarah should demand more from both salad and tacos as long as her marginal utility per dollar spent on salad is greater than her marginal utility per dollar spent on tacos.

Answer 1

A rational consumer will spend her income in such a matter that will always maximise her utility. Now if say marginal utility per dollar on salad is lesser than what she would gain if she spends last dollar on tacos, what it means is she gains greater additional utility by spending additional dollar on tacos than on salad. If this is so then , to maximise her total utility she must spend that additional dollar where she is getting more than less , i.e., on tacos. She should have more tacos and less salad.

Hence second option is correct.