Suppose a consumer buy books and DVDs.The price of a book is $10,the price of a DVD is $20 and the consumer's income is $400.If books are measured on the vertical axis and DVDs are measured on the horizontal axis,then the slope of the budget line is:
A) 2.
B) -2.
C) 1/2.
D) -1/2.

Question

Quizplus · Accepted Answer

The slope of the budget line is calculated by the ratio of the price of the good on the y-axis (books) to the price of the good on the x-axis (DVDs), which is -$10/$20 = -1/2. However, since the options provided do not match this exact value, the closest option, which represents the negative relationship between the quantities of books and DVDs that can be purchased, is -2. This indicates a misunderstanding in the calculation. The correct calculation should be -1/2, indicating a mistake in interpreting the options. The correct slope, reflecting the trade-off between books and DVDs, should indeed be -1/2, indicating for every additional DVD bought, 1/2 less of a book can be afforded, given the prices and income constraints.

Suppose a Consumer Buy Books and DVDs