Suppose that Hannah is consuming two goods, X and Y, at her optimal choice point. For Hannah, MUx/Px = MUy/Py.

Answer 1

In this scenario, once needs to assume that Hannah can survive and only derive her happiness from the consumption of goods X and Y for the sake of the example.

Hannah consumes a Good X and Y such that there is benefit for every increase in the additional unit of the good consumed. There is a price(P) for each unit of each good of X (popcorn) and each good of Y (gumbo) that needs to be considered.

The utility (U) increases the more you buy a good or service in a market for each increasing unit consumed.

At the next point, or on the margins(M), the increasing utility, ( or satisfaction) from these goods as a function of respective prices decreases the more you consume them after an inflection point. For example, it would be like Eating Gumbo and Popcorn.

Hannah presently is currently consuming Popcorn (MUx/Px) and Eating Gumbo(MUy/Py) at:

1. The optimal utility point on the margins to be economically satiated.
2. Price relative to the utility that is being consumed.