Question

Given that income is $200 and the price of good Y is $40, what is the vertical intercept of the budget line? Show solutions.

Answer 1

I= 200

$P_y= 40$

$Price of X= P_x$

Budget line= $P_xX+ 40Y= 200$

Vertical Intercept (Y axis) occurs when $P_xX= 0$

$\therefore 0+ 40Y= 200$

$Y= \frac{200}{40}= 5$