Answer to Question #98105 in Microeconomics for mantey prince

Answer to Question #98105 in Microeconomics for mantey prince

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Question #98105

4. Suppose, the price of commodity A is $80 and that of commodity B is $100.
(a) If the consumer has an income of $1200, form the consumer budget line equation.
(b) If the consumer income increases from $1200 to $2000. On the same graph draw the budget line in (i) and (ii) and show the direction of change.
(c) Repeat the exercise in (ii) when the consumer income falls from $120 to 105

Expert’s answer

(a) If the consumer has an income of $1200, then the consumer budget line equation is 80Qa + 100Qb = 1200.(b) If the consumer income increases from $1200 to $2000, then the budget line equation is 80Qa + 100Qb = 2000, so the budget line will shift to the right. (c) If the consumer income falls from $1200 to 1050, then the budget line equation is 80Qa + 100Qb = 1050, so the budget line will shift to the left.

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