Figure 21-5

-Refer to Figure 21-5.In graph (b),if income is equal to $420,the price of good X is
A) $1.
B) $3.
C) $10.
D) $30.

Question

Figure 21-5

-Refer to Figure 21-5.In graph (b),if income is equal to $420,the price of good X is
A) $1. 
B) $3. 
C) $10. 
D) $30.

Quizplus · Accepted Answer

At an income level of $420, the budget line intersects the vertical axis at a point corresponding to $420 divided by the price of good Y, which is $4. Therefore, the intercept on the horizontal axis gives the maximum quantity of good X that can be purchased with the remaining income after buying the necessary quantity of good Y. This intercept occurs at a price of $10 for good X, which can be seen from the graph to be the highest price level that is tangent to the budget line at the given income level. Therefore, the consumer will choose to purchase good X at a price of $10.

Figure 21-5 -Refer to Figure 21-5.In Graph (B),if Income Is Equal to 21-5.In