I am having trouble understanding this economic concept:

Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal utilities accruing from them.

Can anyone share with me the interpretation of this sentence?

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    $\begingroup$ Welcome! Please give a little more context. Is it a homework question? Is it from a book? $\endgroup$ – emeryville Mar 28 '20 at 15:11

A consumer who likes pizza, orange juice, and apple pie will get more gratification (i.e. "obtain maximum utility") if he spends his money on an optimal combination of these three types of goods rather than by spending all his money on just one type thereof. That optimal combination is determined by how much he enjoys one additional unit of pizza (i.e., slice of pizza), of pie, and of juice, accordingly.

Initially the consumer might crave for pizza and not be much interested in anything else. The first two slices of pizza will taste delicious to him, but the seventh slice most likely will not. This is known as the "law" of decreasing marginal utility.

Upon eating six slices of pizza, he might sense he has had enough of salty food and rather get dessert. But pizza also makes him thirsty. Thus, he is better off by splitting the rest of his money in pie and juice, not just pie. His thirst and his wish for dessert should guide him on how to distribute his remaining funds. With a thoughtful distribution he will avoid ending up feeling stuffed with pie and yet be thirsty & unable to buy juice.


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