Larry consumes only beer (B)and chips (C).If beer is measured on the vertical axis,the relative price of chips in terms of beer is all of the following except A)P_C/P_B. B)the magnitude of the slope of the budget line. C)equal to the opportunity cost of 1 bag of chips. D)the real income in terms of beer. E)the inverse of the relative price of beer in terms of chips.

Question

Quizplus · Accepted Answer

The relative price of chips in terms of beer is the amount of beer needed to buy one bag of chips. Therefore, it is not the same as the real income in terms of beer, which represents the amount of beer Larry can purchase with his available resources. Choices A, B, C, and E are all correct statements about the relative price of chips in terms of beer.

Larry Consumes Only Beer (B)and Chips (C)