If the price of Good X is $2, the price of Good Y is $10 and the consumer's budget is $100, which of the following combinations of Good X and Good Y would be on the budget line?
A) 50 units of Good X and 10 units of Good Y
B) 10 units of Good X and 6 units of Good Y
C) 25 units of Good X and 5 units of Good Y
D) 30 units of Good X and 6 units of Good Y

Question

Quizplus · Accepted Answer

The budget constraint can be written as: 
2X + 10Y = 100
Dividing both sides by 2 gives: 
X + 5Y = 50
This is the equation for the budget line. 
Option C, which is 25 units of Good X and 5 units of Good Y, satisfies the equation: 
X + 5Y = 25 + 5(5) = 50
Therefore, option C is on the budget line. The other options are either inside (A and B) or outside (D) the budget line.

If the Price of Good X Is $2, the Price