A consumer has total money income of Rs 250 to be spent on two goods X and Y with prices of Rs 25 and Rs 10 per unit respectively. On the basis of the information given, answer the following questions: (a) Given the equation of the budget line for the consumer. (b) What is the value of slope of the budget line? (c) How many units can be consumer buy if he is to spend all his money income on good X? (d) How does the budget line change if there is a fall in price of good Y ?

A consumer has total money income of Rs 250 to be spent on two goods X

1.	A consumer has total money income of Rs 250 to be spent on two goods X and Y with prices of Rs 25 and Rs 10 per unit respectively. On the basis of the information given, answer the following questions: (a) Given the equation of the budget line for the consumer. (b) What is the value of slope of the budget line? (c) How many units can be consumer buy if he is to spend all his money income on good X? (d) How does the budget line change if there is a fall in price of good Y ?
Answer» Solution :(a) `P_(x)Q_(x) + P_(y)Q_(y) = M` `25Q_(x) + 10Q_(y) = 250` (b) SLOPE of Budget Line `= (-)P_(x)//P_(y) = (-) 25//10 = (-) = 2.5` (c) If `Q_(y)` is to be Zero `25Q_(x) + 10 Q_(y) = 250` `25Q_(x) + 10(0) = 250` `Q_(x) = 250//25 = 10` units If `P_(y)` falls, the consumer will be able to buy more of good Y in the same money income pushing the Y-intercept of the Budget Line away from original, Keeping the X-intercept constant.