Assume that a consumer spends all of her income (B) on good X and good Y, her budget constraint can be expressed as: PxX + PyY = B Where Px is the price of good X, X is the quantity of good X consumed, Py is the price of good Y, Y is the quantity of good Y consumed, and B is the consumer's total income. Rearranging the above equation to get the budget line expressed as Y in terms of X, we have: B Y == Py Py Now, suppose the consumer has an income of $120 to spend on goods X and Y whose prices are $3 and $5 respectively Px -X
Assume that a consumer spends all of her income (B) on good X and good Y, her budget constraint can be expressed as: PxX + PyY = B Where Px is the price of good X, X is the quantity of good X consumed, Py is the price of good Y, Y is the quantity of good Y consumed, and B is the consumer's total income. Rearranging the above equation to get the budget line expressed as Y in terms of X, we have: B Y == Py Py Now, suppose the consumer has an income of $120 to spend on goods X and Y whose prices are $3 and $5 respectively Px -X
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 19SQ
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Question
Graph the budget line showing all the different combinations of good ? (drawn on the horizontal
axis) and good ? (drawn on the vertical axis) that can be bought given the consumer’s total income.
In the graph, indicate the y-intercept and x-intercept of the budget line.
Transcribed Image Text:Assume that a consumer spends all of her income (B) on good X and good Y, her budget constraint
can be expressed as:
PxX + PyY = B
Where Px is the price of good X, X is the quantity of good X consumed, Py is the price of good Y, Y
is the quantity of good Y consumed, and B is the consumer's total income.
Rearranging the above equation to get the budget line expressed as Y in terms of X, we have:
B
Y ==
Py Py
Px
-X
Now, suppose the consumer has an income of $120 to spend on goods X and Y whose prices are $3
and $5, respectively.
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