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John Q. Public spends all of his income on tacos and hot dogs. Draw his budget line under several conditions: His income is $100, and one taco and one hot dog each cost $2. His income is $150, and the two prices remain the same. His income is $100, hot dogs cost $2 each, and tacos cost $2.50 each.

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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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Chapter
Section
BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 5.A, Problem 1TY
Textbook Problem
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John Q. Public spends all of his income on tacos and hot dogs. Draw his budget line under several conditions:

  1. His income is $100, and one taco and one hot dog each cost $2.
  2. His income is $150, and the two prices remain the same.
  3. His income is $100, hot dogs cost $2 each, and tacos cost $2.50 each.

To determine

(a)

To draw the budget lines of Mr. J in three different scenarios.

Explanation of Solution

A budget line is a graphical representation of all the possible combinations of goods and services which can be purchased with given income and prices. The total money income of the consumer equals the total cost in purchase of goods and services.

Budget Line is denoted by the equation:

   PXX+PYY=M

Where, PX

To determine

(b)

To draw the budget lines of Mr. J in three different scenarios.

To determine

(c)

To draw the budget lines of Mr. J in three different scenarios.

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