Utility Maximization: 

Economists assume that all consumption aims to maximize utility. To maximize utility when acquiring a combination of Good X and Y, consumers should choose a combination such that the marginal utility from Good X equals the marginal utility from Good Y.

MUx = MUy

The consumer is a rational person, who tries to use his or her money income to derive the greatest amount of satisfaction, or utility, from it. Consumers want to get the most for their money or, to maximize their total utility. To maximize satisfaction, a consumer should allocate his or her money so that the last dollar spent on each product, yields the same amount of marginal (extra) utility.

When marginal utility are equivalent, consumer is in equilibrium. As long as the marginal utility from Good X is greater than the marginal utility from Good Y, the consumer can increase total utility by consuming more of Good X and less of Good Y. The reverse is true if the marginal utility of Good Y is greater than the marginal utility of Good X. Once the two marginal utilities are equal, consuming more of one good at the expense of the other will decrease total utility.

Consumers are, of course, subject to budget constraints. Taking account of price, the consumer should choose the combination of goods in which

MUx/ Px = MU y/Py

The utility one receives from a good relative to its price determines how one should allocate one's income. As long as a consumer gets more utility per dollar spent on X than per dollar spent on Y, he should allocate his dollars to the purchase of X, and vice versa if he can more utility per dollar spent on Y. Once a consumer has a balance marginal utility per dollar, spending more on one good at the expense of the other will reduce total utility.