Suppose you are graphing the quantity of bagels on the vertical axis and the quantity of coffee on the horizontal axis. A household's real income in terms of bagels is the
A) relative price of coffee.
B) relative price of bagels.
C) point at which the budget line intersects the x-axis.
D) point at which the budget line intersects the y-axis.

Question

Quizplus · Accepted Answer

Real income is the amount of goods and services that can be purchased with a given budget. In this case, the budget is represented by the budget line, which shows all the possible combinations of bagels and coffee that a household can purchase with a given level of income. The point at which the budget line intersects the y-axis represents the maximum amount of bagels that can be purchased with the given budget, which is the household's real income in terms of bagels. Therefore, the correct answer is D.

Suppose You Are Graphing the Quantity of Bagels on the Vertical