Figure 21-3

-Refer to Figure 21-3.In graph (a),if income is equal to $210,what is the price of good Y
A)$1
B)$2.50
C)$3.50
D)$4

Question

Figure 21-3
 
-Refer to Figure 21-3.In graph (a),if income is equal to $210,what is the price of good Y
A)$1 
B)$2.50 
C)$3.50 
D)$4

Quizplus · Accepted Answer

In graph (a), when income is $210, the budget line is tangent to the highest possible indifference curve. At point A, the consumer is spending all the money on good Y, which means that the price of good Y is equal to the budget line slope. 
The budget line slope is calculated as (income)/(price of X) = 210/60 = 3.5.
Therefore, the price of good Y is $3.50, which is option C.

Figure 21-3 -Refer to Figure 21-3.In Graph (A),if Income Is Equal to Income