Suppose the price of coffee is $3, the price of a bagel is $2 and a person's budget is $40. The budget line's equation is A) $2/Q_bagel + $3/Q_coffee = $40. B) $2(Q_bagel) + $3(Q_coffee) = $40. C) Q_bagel /$2 + Q_coffee /$3 = $40. D) Q_bagel + Q_coffee = $40/($3 + $2).

Question

Quizplus · Accepted Answer

The budget line (which shows all the combinations of coffee and bagels that can be purchased with a $40 budget) can be represented by the equation $2(Q_bagel) + $3(Q_coffee) = $40. This equation shows that the total amount spent on bagels (the quantity of bagels purchased multiplied by the price of bagels) plus the total amount spent on coffee (the quantity of coffee purchased multiplied by the price of coffee) equals $40.

Suppose the Price of Coffee Is $3, the Price of a Bagel