Question

The monthly income of a consumer is Rs 400 and he spends his income on two commodities X and Y. The price of commodity X is Rs.20 and that of Y is Rs25. On the basis of this information

i) Draw the budget line of the consumer.
ii) What will happen to the budget line if the price of commodity Y decreases to Rs2 while the income and price of commodity remain same?
iii) What will happen to the budget line if the price of commodity X decreases to Rs10 while others are being constant?

please answer this...I will mark you the brainliest if you answer correctly... I swear..​

Answer 1

$\sf\bold</p><p>Let \:  X1  \: denote \: Good-1 \: and \:  X2  \: denote \: Good-2. \\ \\ P1=Rs4,P2=Rs5,Y=Rs20</p><p></p><p> \\ \\ (i) P1X1+P2X2=Y</p><p></p><p> \\ \\ 4X1+5X2=20</p><p></p><p> \\ \\ Thus, \: the \: equation \: of \: the \: budget \: line \: is  \: 4X1+5X2=20. \\ \\ </p><p></p><p> \\ \\ (ii) We \: know \: equation \: of \: the \: budget \: line \: is:</p><p> \\ \\ P1X1+P2X2=Y \\ \\ If \: the \: consumer \: spends \: her \: entire \: income \: on \: Good-1, \: then \\ \\ X2=0</p><p></p><p> \\ \\ P1X1=Y⇒4X1=20</p><p></p><p> \\ \\ X1=5</p><p></p><p> \\ \\ Thus, \: the \: consumer \: can \: buy \: 5 \: units \: of \: Good-1 \: if she \: spends \: her \: entire \: income \: on \: that \: good. \\ \\ (iii) If \: the \: consumer \: spends \: her \: entire \: income \: on \: Good-2, \: then \\ \\ X1=0</p><p></p><p> \\ \\ P2X2=Y⇒5X2=20</p><p></p><p> \\ \\ X2=4</p><p></p><p> \\ \\ Thus, \: the \: consumer \: can \: buy \: 4 \: units \: of \: Good-2 \: if \: she \: spends \: her \: entire \: income \: on \: that \: good. \\ \\ Slope \: of \: budget \: line = P2P1=54.</p><p></p><p>{Answer}</p><p>$