Answer to Question #230772 in Microeconomics for Zaidi

Question #230772

A consumer spends all his income (in equilibrium) to purchase 50 units of x and 20 units of y when the price of x and y are Rs. 2 and Rs.5 per unit per unit respectively


1
Expert's answer
2021-08-29T16:54:11-0400

Complete Question:

A consumer spends all his income (in equilibrium) to purchase 50 units of x and 20 units of y when the price of x and y are Rs. 2 and Rs.5 per unit per unit respectively


(i) Write the equation of his budget line.


Solution

BL:=XPX+YPY=MWhere,PX=PriceofXPY=PriceofYAnd,M=IncomeX=50Y=20PX=2PY=5M=XPX+YPYM=50×2+20×5M=100+100M=200BL:XPX+YPY=MX×2+Y×5=2002X+5Y=200BL:=XP_X+YP_Y=M\\Where, P_X=Price of X\\P_Y=Price of Y\\And, M=Income\\X=50\\Y=20\\P_X=2\\P_Y=5\\M=XP_X+YP_Y\\M=50\times2+20\times 5\\M=100+100\\M=200\\BL:XP_X+YP_Y=M\\X\times2+Y\times5=200\\2X+5Y=200


Therefore, the equation of the budget line is 2X+5Y=200.


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