Question

Emilio finds a new job that doubles his income. He adjusts his consumption. From this, we know that, for every normal good Emilio now buys, his

a. marginal utility per dollar will be greater than before his income increase.
b. marginal utility per dollar will be smaller than before his income increase.
c. marginal utility per dollar will stay the same as before his income increase.
d. total utility will be smaller thean before his income increase.

Answer 1

When Emilio's income doubles, his marginal utility per dollar for normal goods will be smaller than before his income increase.

Step-by-step explanation:

When Emilio's income doubles, he adjusts his consumption accordingly. If the goods that Emilio buys are normal goods, then his marginal utility per dollar will be smaller than before his income increase. This is because the increase in income allows him to buy more of the goods he wants, causing the additional units of the goods to provide him with less overall satisfaction compared to the initial units.