If the price of good X is $10 and the price of good Y is $5, how much of good X can the consumer purchase if her income is $15 and she spends it entirely on purchasing good X?
a. 1.5
b. 0
c. 3
d. 2
Solution:
The correct answer is a. 1.5.
Budget constraint: I = PxX + PyY
I = 15
Px = 10
Py = 5
15 = 10X + 5Y
Good X = "\\frac{15}{10}" = 1.5
The consumer can purchase an amount of Good X = 1.5
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