Question

Ali’s budget line relating good X and good Y has intercept of 50 unit of good X and 20 units of good Y. if the price of good X is 12, what is Ali’s income? What is the price of good Y? What is then slope of budget line?

Answer 1

Budget line of good X &Y has intercept then individual A income is

$Q_X=50$ units, $Q_Y=20$ units, $P_X=$$$12$

$Income=P_X\times Q_X+P_Y \times Q_Y$

When the budget line has intercept $Q_X=50$ units and $P_X=$ $$12$

then, income will be,

$=50\times 12$

$income=$ $$600$

The price (p) of good Y is the point of interception with X-axis

$600=12\times 0+P_Y \times 20$

$P_Y=$ $$30$

The slope of budget is

$600=12\times Q_X+30\times Q_Y$

$30Q_Y=600-15Q_X$

$Q_Y=20-0.5Q_X$

slope of the budget line$=-0.5$