Use the following to answer questions:
Figure: Water and Electricity
-(Figure: Water and Electricity) Refer to the figure. Using the solid budget constraint in this diagram, if electricity costs $6 per MJ, how much does a gallon of water cost?
A) $4
B) $6
C) $8
D) $12

Question

Use the following to answer questions:
Figure: Water and Electricity 
-(Figure: Water and Electricity) Refer to the figure. Using the solid budget constraint in this diagram, if electricity costs $6 per MJ, how much does a gallon of water cost?
A) $4 
B) $6 
C) $8 
D) $12

Quizplus · Accepted Answer

The budget constraint represents the trade-off between water and electricity. If electricity costs $6 per MJ, and the slope of the budget line indicates the rate at which water can be traded for electricity, then the cost of water can be determined by the inverse of the slope. If the slope is 1.5, then water costs $4 per gallon.

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