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A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.(i) Write down the equation of the budget line.(ii) How much of good 1 can the consumer consume if she spends her entire income on that good?(iii) How much of good 2 can she consumed if she spends her entire income on that good?(iv) What is the slope of the budget line?Questions 5, 6 and 7 are related to question 4. |
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Answer» A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20. (i) Write down the equation of the budget line. (ii) How much of good 1 can the consumer consume if she spends her entire income on that good? (iii) How much of good 2 can she consumed if she spends her entire income on that good? (iv) What is the slope of the budget line? |
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