Question

A person has $ 100 to spend on two goods X and Y whose respective prices are $3

and $5. A. Draw the budget line. B. What happens to the original budget line if the

budget falls by 25%? C. What happens to the original budget line if the price of X

doubles? D. What happens to the original budget line if the price of Y falls to $4?

Answer 1

A. I=100, px=3, py=5

B. I=75, px=3, py=5

C. I=100, px=6, py=5

D. I=100, px=3, py=4