Suppose a consumer must choose between the consumption of sandwiches and pizza. If we measure the quantity of pizza on the horizontal axis and the quantity of sandwiches on the vertical axis, and if the price of a pizza is €10 and the price of a sandwich is €5, then the slope of the budget constraint is
A) 2
B) 10
C) 1/2
D) 5

Question

Quizplus · Accepted Answer

The slope of the budget constraint is the negative of the price ratio of the two goods. Here, it is - (price of pizza / price of sandwich) = - (10/5) = -2. The slope is typically expressed as a positive number, so the answer is 2.

Suppose a Consumer Must Choose Between the Consumption of Sandwiches