Question

suppare a consumer spends his entire money income on two commodity X 24.the consumer's money income is rs 100 .the price of commodity X(Px) is RS 10 and the prices of commodity Y (Py) is RS 5. status the budget equation of the consumer and draw the budget line .how the budget line would change if income increase from rs 100 to rs 200​

Answer 1

Answer:

Let the two quantities of goods be X and Y. We are given Px = Rs 4, P = Rs 5, Consumer’s income (M) = Rs 20. Budget line equation is,

Px .X + Py .Y = M or = 4X + 5Y = 20

If quantity consumed of good Y = 0, Budget equation becomes,

Px.X + zero = M = 4.X = 20 = X = 20/4 = 5 units

If quantity consumed of good X = 0, Budget equation becomes,

Zero + Py.Y = M

or = 5Y = 20 = Y = 20/5 = 4 units.

Slope of budget line = Px/Py = 4/5 = 0.8

Explanation: