Figure 21-5
(a) (b)

-Refer to Figure 21-5. In graph (b), what is the price of good Y relative to the price of good X (i.e., PY/PX)?
A) 1
B) 1/3
C) 3
D) 10

Question

Figure 21-5
(a) (b)
  
-Refer to Figure 21-5. In graph (b), what is the price of good Y relative to the price of good X (i.e., PY/PX)?
A) 1 
B) 1/3 
C) 3 
D) 10

Quizplus · Accepted Answer

Based on the graph (b), the slope of the budget constraint is -3. This means that for every unit of good Y, 3 units of good X must be given up. Therefore, the price of good Y relative to good X is 3 (i.e., PY/PX = 3). The optimal choice for the consumer will be on the highest possible indifference curve that is still tangent to the budget constraint. Without knowing the specific preferences of the consumer, we cannot determine the exact combination of X and Y that will be chosen.