Question

Suppose a consumer has income of birr 20 which is to be spent on good B and A. Good B costs birr 4 and good A costs birr 2, then

A.Determine budget equation

B.Draw budget line

C.Calculate slope of budget line

D.Can consumer be on the budget line buying 5 unit of good A and 2 unit of good B

Answer 1

A. $2A + 4B = 20$

B. if the amount of A is on x axis and the amount of B is on y axis then

C. the slope is $\frac {5}{10} = 0.5$

D. no, the consumer will be below his budget line