Let Y = $100, QX = quantity of good X, and QW = quantity of good W, PX = $4 and PW = $5. The budget equation is
A)100 = 4QX + 5QW.
B)100 = QX + (4/5)QW.
C)QX = 100 + (4/5)QW.
D)QX = QW + (4/5)Y.
E)QW = QX + (4/5)Y.

Question

Quizplus · Accepted Answer

The budget equation is the total amount of money (Y) that can be spent on the two goods (PXQX and PWQW), so it is:
Y = PXQX + PWQW
Substituting the given values for Y, PX, and PW, we get:
100 = 4QX + 5QW
Therefore, the correct answer is A.

Let Y = $100, QX = Quantity of Good X