If you have an income of $40 to spend, commodity 1 costs $4 per unit, and commodity 2 costs $8 per unit, then the equation for your budget line can be written A)x₁/4 + x₂/8 = 40. B)(x₁ + x₂)/12 = 40. C)x₁ + 2x₂ = 10. D)5x₁ +9x₂ = 41. E)12(x₁ + x₂) = 40.

Question

Quizplus · Accepted Answer

The budget line equation is derived from the total income divided by the cost of each commodity. Here, $4x_1 + $8x_2 = $40 simplifies to x_1 + 2x_2 = 10.

If You Have an Income of $40 to Spend, Commodity