Question

Assume expenditure is equal to income(I_O). When the price of X is 3 and the price of Yis 3, an individual consumes a bundle of X = 4, Y = 4.

P_X=Price of X; P_Y=Price of Y

 

a)    How much is the total expenditure of an individual? What is the income of an individual?

Answer 1

a) $P_X$ = Price of X=3

$P_Y=$ Price of Y =3

Individual consumes : X=4 and Y= 4

Total expenditure $=P_XX+P_YY$

$=(3\times4)+(3\times4)=24$

Total income = Total expenditure

= 24