The consumer's income is $800.
-According to the above figure,what are the prices of goods X and Y?
A) $P _ { x }$ = $10, $P _ { y }$ = $8
B) $P _ { x }$ = $8, $P _ {y }$ = $10
C) $P _ { x }$ = $100, $P _ { y}$ = $80
D) $P _ { x }$ = $20, $P _ { y }$ = $60
E) $P _ { x }$ = $60, $P _ { y }$ = $20

Question

The consumer's income is $800.
-According to the above figure,what are the prices of goods X and Y?
A) $P _ { x }$ = $10, $P _ { y }$ = $8 
B) $P _ { x }$ = $8, $P _ {y }$ = $10 
C) $P _ { x }$ = $100, $P _ { y}$ = $80 
D) $P _ { x }$ = $20, $P _ { y }$ = $60 
E) $P _ { x }$ = $60, $P _ { y }$ = $20

Quizplus · Accepted Answer

Based on the figure, the budget line starts at $800 on the Y-axis and intersects the X-axis at 80 (point A). This means that if the consumer spends all their income on good Y, they can buy 100 units (800/8 = 100). If they spend all their income on good X, they can buy 80 units (800/10 = 80). Therefore, the slope of the budget line is -10/8 or -5/4. This means that for every unit of X the consumer buys, they have to give up 5/4 units of Y.

Using this information, we can look at the answer choices:
A) This would mean that the slope of the budget line is -8/10 or -4/5, which is not correct. 
B) This is correct. The slope of the budget line is -10/8, and the price of X is $8 and the price of Y is $10. 
C) This would mean that the slope of the budget line is -80/100 or -4/5, which is not correct. 
D) This would mean that the price of Y is more expensive than the price of X, which is not consistent with the slope of the budget line. 
E) This would mean that the slope of the budget line is -20/60 or -1/3, which is not correct.

The Consumer's Income Is $800 PxP _ { x }Px​ = $10

The Consumer's Income Is $800 $P _ { x }$ = $10