Assume expenditure is equal to income (IO). When the price of X is 3 and the price of Y is 3, an individual consumes a bundle of X = 4, Y = 4. PX = Price of X; PY = Price of Y a) How much is the total expenditure of an individual? What is the income of an individual? b) What is the maximum consumption of X? c) What is the maximum consumption of Y?
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Explanation:
The total expenditure of the individual is=
a) 24 rupee or unit = price of x is 3 and he consume 4 bundle of good x then.. 3×4= 12 same for commodity y so 12+12=24.
we know that income = expenditure so from point a expenditure is 24 so income is also 24.
b) the maximum consumption of x is 8. because total income is 24 and one good x price is 3 so 8 will we the maximum consumption of x.
c)same 8.
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