Suppose that a consumer purchases just two goods, X and Y. The Y-intercept of the budget line in this case would indicate the
A) maximum dollar amount of budget that the consumer has for good Y.
B) price that the consumer has to pay for each unit of good Y.
C) maximum quantity of good Y that the consumer could buy with a given budget.
D) quantity of good Y that the consumer would want to buy.

Question

Quizplus · Accepted Answer

The Y-intercept of the budget line represents the maximum quantity of good Y that the consumer could buy with a given budget, assuming the consumer spends all of their budget on good Y. Therefore, the correct answer is C. Option A is incorrect because the budget line does not provide information about the total budget available to the consumer, only what can be spent on goods X and Y. Option B is incorrect because the price of Y is represented by the slope of the budget line, not the Y-intercept. Option D is incorrect because the quantity of good Y that the consumer would want to buy is subjective and cannot be determined from the budget line alone.

Suppose That a Consumer Purchases Just Two Goods, X and Y