1.

Aconsumer wants to consume two goods. The prices of the two goods areRs 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 he/she spends his/herentire income on that good?(iii)How much of good 2 can be consumed if he/she spends his/her entireincome on that good?(iv)What is the slope of the budget line?

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 he/she spends his/her
entire income on that good?


(iii)
How much of good 2 can be consumed if he/she spends his/her entire
income on that good?


(iv)
What is the slope of the budget line?



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