Figure 3.2.1
-Refer to Figure 3.2.1 above. Let I = income, P_F the price of food, and P_C the price of clothing. The vertical intercept of the budget line equals 40, which is equivalent to:

Question

Figure 3.2.1 -Refer to Figure 3.2.1 above. Let I = income, P<sub>F</sub> the price of food, and P<sub>C</sub> the price of clothing. The vertical intercept of the budget line equals 40, which is equivalent to: A) I. B) -P<sub>C</sub>/P<sub>F</sub>. C) I/P<sub>C</sub>. D) I/P<sub>F</sub>.

Quizplus · Accepted Answer

The vertical intercept of the budget line represents the maximum amount of clothing that can be purchased if all income is spent on clothing. This is calculated by dividing total income (I) by the price of clothing (P_C), hence the correct answer is I/P_C.

Figure 3.2.1 -Refer to Figure 3.2.1 Above. Let I = Income, PF

Figure 3.2.1 -Refer to Figure 3.2.1 Above. Let I = Income, P_F