Answer to Question #289904 in Macroeconomics for Shinu maxx

Question #289904

A consumer spend income 5000 on food and cloth draw the budget line and identify intercept food price is100 and cloth price is 250

1
Expert's answer
2022-01-23T15:37:45-0500

Question #289904

Given:


Px=100P_x = 100


Py=250P_y = 250


Budget=5,000Budget=5,000

Solution:

Let xx be the quantity of food consumed by the customer, yy be the quantity of cloth consumed by the customer. In this case, the budget line has the equation:

5,000=Pxx+Pyy5,000 = P_x \cdot x + P_y\cdot y \Rightarrow

5,000=100x+250y\Rightarrow 5,000=100\cdot x+250\cdot y

The intercepts are:

  • For the x-intercept, we have:
y=05,000=100x+2500y=0 \Rightarrow5,000=100\cdot x+250\cdot0 \Rightarrow


5,000=100xx=5,000÷100=50\Rightarrow 5,000=100\cdot x\Rightarrow x=5,000\div 100=50


Thus, x-intercept is (50, 0).

  • For the y-intercept, we have:
x=05,000=1000+250yx=0\Rightarrow 5,000=100\cdot 0+250 \cdot y\Rightarrow

5,000=250yy=5,000÷250=20\Rightarrow 5,000 = 250\cdot y\Rightarrow y=5,000\div 250=20

Thus, the y-intercept is (0,20).

Based on the equation of the budget line, the graph is:


Answer: the equation of the budget line is 5,000=100x+250y5,000=100\cdot x+250\cdot y . The intercepts are: (0, 20) and (50,0).


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