A consumer budget is Rs 40 .He is buying Good 1 and Good 2. Price oo Good 1 is Rs 8 and Good 2 Rs 10 per unit.
a) Draw a budget line.
b)Is consumer can purchase 5 unit of Good 1 and 5 unit of Good 2?
c) Show effect on budget line due to falling price of Good 1 from Rs 8 Rs 4 per unit.
plzzz solve this
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(i) = Rs 4
= Rs 5
M = Rs 20
Equation of the budget line=M
(ii) If Rs 20 is entirely spent on good 1, then the amount of good 2 demanded will be zero i.e., as the consumer has no income left to spend on good 2.
Amount of good 1 consumed = 5 units
(iii) If Rs 20 is entirely spent on good 2, then , as the consumer has no income left to spend on good 1.
Amount of good 2 consumed = 4 units
=-0.8
(i) = Rs 4
= Rs 5
M = Rs 20
Equation of the budget line=M
(ii) If Rs 20 is entirely spent on good 1, then the amount of good 2 demanded will be zero i.e., as the consumer has no income left to spend on good 2.
Amount of good 1 consumed = 5 units
(iii) If Rs 20 is entirely spent on good 2, then , as the consumer has no income left to spend on good 1.
Amount of good 2 consumed = 4 units
=-0.8
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