Answer to Question #123357 in Microeconomics for Prerna

Question

If bishesh's budget line has intercepts 20X and 30Y and Py is rs 10. What is his income ? What is Px ? What is the slope of the budget line?

Answer 1

If a budget line relating good X and good Y has intercept $Q_x = 20$ unit of good X and $Q_y = 30$ units of good Y and$P_y = 10(dollars)$ then the Bishesh's  income is

$I = P_x*Qx + P_y*Q_y$

When the budget line has the intercept $Q_y = 30$ and $P_y = 10$ dollars then;

$I = P_x*0 + 30*10 = 300$ so Bishesh's income is I = $300. $I = 300$ dollars

The price of good Y can be found from the income equation in the point of interception with the X-axis

$300 = P_x*20 + 10*0$

$P_x = 15$ dollars.

The slope of budget line is;

$300 = 15*Q_x + 10*Q_y$

$10Q_y = 300 - 15Q_x$

$Q_y = -1.5Q_x + 30$

Therefore the slope of budget line is $-1.5$