The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream.

-Refer to the figure above.If the line represents Lesley's budget constraint,and Lesley has $60 budget to be spent on burgers and ice cream,what is the price of burger and ice cream?
A) Pbᵤᵣgₑᵣ = $10, and Pᵢcₑcᵣₑₐm = $6
B) Pbᵤᵣgₑᵣ = $5, and Pᵢcₑcᵣₑₐm = $3
C) Pbᵤᵣgₑᵣ = $12, and Pᵢcₑcᵣₑₐm = $3
D) Only the ratio of the prices can be determined

Question

The following figure shows the budget constraint of Lesley when she is faced with two goods: burgers and icecream.
 
-Refer to the figure above.If the line represents Lesley's budget constraint,and Lesley has $60 budget to be spent on burgers and ice cream,what is the price of burger and ice cream?
A) Pbᵤᵣgₑᵣ = $10, and Pᵢcₑcᵣₑₐm = $6 
B) Pbᵤᵣgₑᵣ = $5, and Pᵢcₑcᵣₑₐm = $3 
C) Pbᵤᵣgₑᵣ = $12, and Pᵢcₑcᵣₑₐm = $3 
D) Only the ratio of the prices can be determined

Quizplus · Accepted Answer

The budget constraint is given by the equation:Pb * Qb + Pi * Qi = Bwhere Pb is the price of a burger, Qb is the quantity of burgers purchased, Pi is the price of an ice cream, Qi is the quantity of ice creams purchased, and B is the total budget.We are given that Lesley has a budget of $60, so B = 60. We can also see from the graph that the budget constraint is a straight line, which means that the ratio of Pb to Pi is constant. In other words, the price of a burger is always a certain multiple of the price of an ice cream.We can use this information to find the prices of burgers and ice cream. Let's say that the price of a burger is x and the price of an ice cream is y. Then we have:x/y = constantWe can find the value of the constant by plugging in the coordinates of any point on the budget constraint. For example, we can use the point (10, 6), which represents the point where Lesley buys 10 burgers and 6 ice creams. Plugging this point into the equation, we get:10/6 = constantTherefore, the constant is 5/3. This means that the price of a burger is always 5/3 times the price of an ice cream.We can now use this information to find the prices of burgers and ice cream. We know that Lesley has a budget of $60, so we can write:10x + 6y = 60We can also use the fact that the price of a burger is 5/3 times the price of an ice cream to write:x = 5/3ySubstituting this into the first equation, we get:10(5/3y) + 6y = 60Solving for y, we get:y = 6Therefore, the price of an ice cream is $6. Substituting this into the equation x = 5/3y, we get:x = 5/3(6) = 10Therefore, the price of a burger is $10.

The Following Figure Shows the Budget Constraint of Lesley When