If you have an income of $40 to spend, commodity 1 costs $2 per unit, and commodity 2 costs $10 per unit, then the equation for your budget line can be written A)x₁ + 5x₂ = 20. B)x₁/2+x₂/10 = 40. C)(x₁ + x₂)/12 = 40. D)3x₁ + 11x₂ = 41. E)12(x₁ + x₂)= 40.

Question

Quizplus · Accepted Answer

The budget line equation is derived from the total income and the prices of the commodities: 2x₁ + 10x₂ = 40, which simplifies to x₁ + 5x₂ = 20.

If You Have an Income of $40 to Spend, Commodity