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Est1 Task 5

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Task 5
According to the utility theory, consumers would change their spending pattern if the satisfaction they gain from the products or the price of products alter. For instance, initially a consumer may be allocating her spending between two products, X and Y such as:
Marginal utility of X = Marginal utility of Y
Price of X Price of Y

20 = 35 4 7

Assume Jane is maximizing her total utility, as changing her purchase cannot increase her satisfaction. She is gaining the same utility per dollar spent is 5 unit. If , however, the price of product X fell to RM 2, she would not be maximizing her utility if she did not alter her purchase. 20 > 35 2 7
Jane is gaining more satisfaction per dollar

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