Oscar makes purchases of an existing product (x) such that the marginal utility of the last unit he consumes is 10 utils and the price is $5. he also tries a new product (y) and the marginal utility of the last unit he consumes is 8 utils and the price is $1. the equal marginal principle suggests that oscar shoulda. increase his consumption of product x and increase his consumption of product y. b. increase his consumption of product x and decrease his consumption of product y. c. increase his consumption of product y and decrease his consumption of product x. d. decrease his consumption of product y and decrease his consumption of product x.

The answer is: C) Increase his consumption of product Y and decrease his consumption of product X.

Explanation:

The equi-marginal utility principle states that a consumer will spend his money buying different goods that provide him or her the maximum possible satisfaction.

In Oscar's case, each extra unit of product X delivers 10 units of satisfaction, but product X costs $5. Instead he should buy product Y, which costs $1, and gives him 8 units of satisfaction. By consuming product Y, Oscar is getting 8 units of satisfaction per dollar spent, while he only gets 2 unit of satisfaction per dollar spent with product X.

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