A person has $100 to spend on two goods X and Y whose respective prices are $3 and $5.
a) Find the equation of the budget line and sketch its graph
b) What will be the equation of the new budget line if the original budget falls by 25%?
Sketch its graph
c) What will be the equation of the new budget line if only the price of X doubles? Sketch
its graph
a) Equation of Budget ine
I= 100
Equation= 3X+5Y= 100
It is as below in a diagram;
b) The budget reduces by 25%
New budget=75%
New budget line= 3X+5Y= 75
It is as below in a diagram;
c) If price of X doubles
New price=3
New budget line= 6X+5Y= 100
It is as below in a diagram;
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