Use the following to answer questions :
Figure 5A-2
-Refer to Figure 5A-2.If the budget line is AB and X costs $6 and Y costs $4, then income = $24.

Question

Use the following to answer questions :
Figure 5A-2 
-Refer to Figure 5A-2.If the budget line is AB and X costs $6 and Y costs $4, then income = $24.

Quizplus · Accepted Answer

We can use the formula for the budget line slope to determine income:

Slope of AB = -($6/$4) = -$1.5

Income = (Slope of AB) x (Quantity of X) + (Price of X) x (Quantity of X)

Substituting the given values:

-$1.5I + $6X = $24

Solving for I:

I = ($6X - $24)/-$1.5 = $16

Therefore, the statement "If the budget line is AB and X costs $6 and Y costs $4, then income = $24" is false. The correct income is $16.

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