Jake spends $200 on fried chickens and Pepsi. The price of a fried chicken is $5 and Pepsi is $2.50 per bottle. With the quantity of Pepsi being measured along the vertical axis, the slope of Jake's budget line is ________ per fried chicken.
A) 0.5 of a Pepsi
B) -0.5 of a Pepsi
C) 2 Pepsis
D) -2 Pepsis

Question

Quizplus · Accepted Answer

The budget line equation can be represented as:
5C + 2.5P = 200, where C is the quantity of fried chicken and P is the quantity of Pepsi.
Solving for P, we get: P = (200 - 5C)/2.5.
The slope of the budget line can be found by taking the negative of the ratio between the price of fried chicken and the price of Pepsi. Therefore, the slope is -5/2.5 = -2.
This means that for every fried chicken Jake purchases, he could buy 2 bottles of Pepsi. The slope being negative indicates an inverse relationship between the two goods, meaning that as the quantity of one good increases, the quantity of the other good decreases. Therefore, if Jake decides to buy more fried chickens, he must sacrifice some Pepsi. This makes D the correct choice, which represents the slope of the budget line as -2 Pepsis per fried chicken.

Jake Spends $200 on Fried Chickens and Pepsi