Refer to Goods X and Y. Suppose the consumer is spending all of his income buying some of both goods. If the marginal value of X is greater than the relative price of X, how can the consumer improve his level of satisfaction?
Assume that good X is on the horizontal axis and good Y is on the vertical axis in the consumer-choice diagram. PX denotes the price of good X, PY is the price of good Y, and I is the consumer's income. Unless otherwise stated, the consumer's preferences are assumed to satisfy the standard assumptions.
a. By purchasing more of both goods.
b. By purchasing more of good X and less of good Y.
c. By purchasing more of good Y and less of good X.
d. The consumer cannot improve his level of satisfaction because he is at the optimum.
b. By purchasing more of good X and less of good Y.
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