The vertical intercept of the consumer's budget line is equal to
A) $\pi - \mathrm { T }$.
B) $w h + \pi - T$.
C) $h + \frac { \pi - T } { w }$.
D) $w h - T$.
E) $c + w ( l - h )$.

Question

The vertical intercept of the consumer's budget line is equal to 
A) $\pi - \mathrm { T }$.
B) $w h + \pi - T$.
C) $h + \frac { \pi - T } { w }$.
D) $w h - T$.
E) $c + w ( l - h )$.

Quizplus · Accepted Answer

The vertical intercept of a consumer's budget line represents the maximum amount of goods that can be purchased if all income is spent on goods. This is calculated by adding the consumer's labor income (wage times hours worked, $w h$) and non-labor income ($\pi$) and then subtracting taxes ($T$). Thus, the correct formula is $w h + \pi - T$.

The Vertical Intercept of the Consumer's Budget Line Is Equal π−T\pi - \mathrm { T }π−T

The Vertical Intercept of the Consumer's Budget Line Is Equal $\pi - \mathrm { T }$