Question

a consumer wants to consume two goods the price of the two goods are rs 4 and rs 5 respectively the consumers income is rs 20​

Answer 1

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Answer 2

Answer:

$➜\sf\red{Answer:-}$

P1 = Rs 4 = Rs 5 M = Rs 20 Equation of the budget line = P1 x x1 + P2 x x2 = M 4x1 + 5x2 = 20 (ii) If Rs 20 is entirely spent on good 1, then the amount of good 2 demanded will be zero i.e., x2 = 0, as the consumer has no income left to spend on good 2. 4x1 + 5(0) = 20 4x1 = 20 x1 = 20/4 x1 = 5 Amount of good 1 consumed = 5 units (iii) If Rs 20 is entirely spent on good 2, then x1 = 0, as the consumer has no income left to spend on good 1. 4(0) + 5x2 = 20 5x2 = 20 x2 = 20/5 x2 = 4 Amount of good 2 consumed = 4 units (iv) Slope of the budget line = - P1/P2 = - (Price of good 1)/(price of good 2) = - 4/5 = - 0.8

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