Question

5. 3) A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5. a. Draw the budget line. b. What happens to the original budget line if the budget falls by 25%? c. What happens to the original budget line if the price of X doubles? d. What happens to the original budget line if the price of Y falls to $4?

Answer 1

Budget line

Explanation:

A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5.

a) 3x + 5y = 100 is the budget line.

b) If the budget falls by 25%, then money = 100 - 25 = 75

So the budget line will come closer to the axis proportionately.

The budget line will be 3x + 5y = 75

c) If price of x is doubled in original budget, then budget line becomes:

6x + 5y = 100

d) If price of Y is falls to Rs. 4 in original budget, then budget line becomes:

3x + 4y = 100

Answer 2

Answer:

draw the budget line.

Explanation:

draw the budget line.