Exhibit 20-7

Refer to Exhibit 20-7. For graph (2), if the price of X is $60, what is the consumer's income?
A)$1,000
B)$2,000
C)$3,000
D)$6,000
E)This cannot be determined from the information provided.

Question

Exhibit 20-7 ​

Refer to Exhibit 20-7. For graph (2), if the price of X is $60, what is the consumer's income?
A)$1,000 
B)$2,000 
C)$3,000 
D)$6,000 
E)This cannot be determined from the information provided.

Quizplus · Accepted Answer

From the graph, we can see that when the price of X is $60, the quantity demanded is 20 units. Therefore, the total expenditure on good X is 20 x $60 = $1200. The budget line passes through the point ($1200/0.4, 0), which is ($3000, 0) on the graph. This represents the minimum income required to purchase 20 units of X at a price of $60. Therefore, the consumer's income must be at least $3000.

Exhibit 20-7 ​ Refer to Exhibit 20-7. for Graph (2), If the Price

Exhibit 20-7 Refer to Exhibit 20-7. for Graph (2), If the Price