Question

Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if he/she spends her entire income. The prices of two goods are Rs 6 and Rs 8. How much is the consumer’s income?

Answer 1

ANSWER:

Rs 100

EXPLANATION:

$\mathrm{P}_{1}=6 \mathrm{Rs}$

$\mathrm{P}_{2}=8 \mathrm{Rs}$

$\mathrm{x}_{1}=6$

$\mathrm{x}_{2}=8$

Budget line $= \mathbf{M}=\mathbf{P}_{1} \mathbf{x}_{1}+\mathbf{P}_{2}$\mathbf{x}_{2}

$M=6 \times 6+8 \times 8$

M = 36 + 64

M = 100

Therefore, the consumer’s income is 100 Rs.