If good $x$ is measured along the horizontal axis and good $y$ is measured along the vertical axis, then the slope of the budget constraint can be expressed as
A) - $P _ { x } / P _ { y }$
B) - $I / P _ { y }$
C) - $I / P _ { x }$
D) - $P _ { y } / P _ { x }$

Question

Quizplus · Accepted Answer

The slope of the budget constraint represents the rate at which a consumer can trade one good for another while staying within their budget. The opportunity cost of good x in terms of good y is the ratio of their prices, which is P_x/P_y. However, since the slope of the line is measured in terms of y/x (vertical change over horizontal change), we need to take the reciprocal of the opportunity cost to get the slope. Therefore, the slope of the budget constraint is -P_x/P_y, which corresponds to choice A.

If Good xxx Is Measured Along the Horizontal Axis and Good yyy

If Good $x$ Is Measured Along the Horizontal Axis and Good $y$