-Suppose the price of coffee is $3, the price of a bagel is $2 and a person's budget is $40. The budget line's equation is A) $2/Q_bagel + $3/Q_coffee = $40. B) $2(Q_bagel) + $3(Q_coffee) = $40. C) Q_bage_l /$2 + Q_coffee /$3 = $40. D) Q_bagel + Q_coffee = $40/($3 + $2).

Question

Quizplus · Accepted Answer

The budget line equation is the equation of a line that represents all possible combinations of goods that a consumer can purchase given their budget and the prices of the goods. The equation of a line is typically written in the form y = mx + b, where m is the slope of the line and b is the y-intercept. In this case, the slope of the budget line is -$2/$3, which means that for every $1 increase in the price of coffee, the consumer can purchase 2/3 fewer bagels. The y-intercept of the budget line is $40, which means that the consumer can purchase $40 worth of goods if the prices of coffee and bagels are both $0. The equation of the budget line is therefore:2(Q_bagel) + $3(Q_coffee) = $40

-Suppose the Price of Coffee Is $3, the Price of a Bagel