Let I be the income of the consumer, P_x be the price of good x and P_y be the price of good y. If good $x$ is measured along the horizontal axis and good $y$ is measured along the vertical axis, then the " $x$ -intercept" measures the maximum amount of good $x$ that the consumer can afford, which can be expressed as A) $P _ { x } / P _ { y }$ B) $I / P _ { y }$ C) $I / P _ { x }$ D) $P _ { x } / I$

Question

Quizplus · Accepted Answer

The maximum amount of good $x$ that the consumer can afford is given by the budget constraint equation:
$$P_{x}S_{1U1B1}^{x}+P_{y}S_{1U1B1}^{y}=I$$
Solving for $S_{1U1B1}^{x}$, we get:
$$S_{1U1B1}^{x}=\frac{I}{P_{x}}-\frac{P_{y}}{P_{x}}S_{1U1B1}^{y}$$
At the $x$-intercept, $S_{1U1B1}^{y}=0$, so we have:
$$S_{1U1B1}^{x}=\frac{I}{P_{x}}$$
Therefore, the maximum amount of good $x$ that the consumer can afford is equal to their income divided by the price of good $x$, which is option C.

Let I Be the Income of the Consumer, Px Be xxx

Let I Be the Income of the Consumer, P_x Be $x$