Suppose the price of is $20 per unit, the price of is $10 per unit, and the consumer's income is $1000 per month. The equation of the budget line is
A) $1000 = 10 A + 20 B$
B) $1000 = 20 A + 10 B$
C) $20 \mathrm {~A} = 10 \mathrm {~B}$
D) $1000 = A + B$

Question

Suppose the price of is $20 per unit, the price of is $10 per unit, and the consumer's income is $1000 per month. The equation of the budget line is 
A) $1000 = 10 A + 20 B$
B) $1000 = 20 A + 10 B$
C) $20 \mathrm {~A} = 10 \mathrm {~B}$
D) $1000 = A + B$

Quizplus · Accepted Answer

The equation of the budget line is given by the formula: 
income = (price of A x quantity of A) + (price of B x quantity of B) 
Substituting the given values: 
1000 = 20A + 10B 
This equation represents the budget line. 
To find the best choice, we need to look for a point on the budget line that maximizes the consumer's utility. This point will be where the budget line intersects with the highest indifference curve, representing the most preferred bundle of goods. Without information on the consumer's preferences, we cannot determine the specific choice. The equation of the budget line is given by: 
Income = (Price of A)(Quantity of A) + (Price of B)(Quantity of B) 
Substituting the given values, we get: 
1000 = 20A + 10B 
This is the equation of a straight line with intercepts of (50,0) and (0,100), which represents all the possible combinations of A and B that can be purchased with an income of $1000. The optimal choice would be a point on this line that maximizes the utility of the consumer, given their preferences. Without information about the consumer's preferences or the utility function, we cannot determine the best choice(s).

Suppose the Price of Is $20 Per Unit, the Price 1000=10A+20B1000 = 10 A + 20 B1000=10A+20B

Suppose the Price of Is $20 Per Unit, the Price $1000 = 10 A + 20 B$