The equation for a budget line for goods X and Y, with P_x being the price of X, P_y being the price of Y, and B being the budget, can be written as: A) P_xX + P_yY = B. B) P_xX + P_yY = 1 / B. C) P_xX = B + P_yY. D) P_xX / P_yY = 1 − B.

Question

Quizplus · Accepted Answer

The equation for a budget line, which represents all combinations of goods X and Y that a consumer can purchase given their budget and the prices of the goods, is correctly represented by the total expenditure on X and Y equaling the budget, as shown in option A.

The Equation for a Budget Line for Goods X and Y