Suppose the price of A is $20 per unit, the price of B is $10 per unit, and the consumer's income is $1000 per month. The equation of the budget line is
A) 1000 = 10A + 20B
B) 1000 = 20A + 10B
C) 20A = 10B
D) 1000 = A + B

Question

Quizplus · Accepted Answer

The equation of the budget line is given by:
Budget = Price of A x Quantity of A + Price of B x Quantity of B
Substituting the given values, we get:
1000 = 20A + 10B
Solving for one variable, we get the equation of the budget line, which is a straight line with intercepts on the A and B axes as (50,0) and (0,100), respectively. The slope of the line is -2, indicating that the consumer can buy 2 units of B for every unit of A foregone. The optimal choice depends on the consumer's preferences, but any point on the budget line is feasible given the prices and income.

Suppose the Price of a Is $20 Per Unit, the Price