Adam has a monthly income of $20 that can be spent on books (B)and pencils (P).The price of a book is $5 and the price of a pencil is $0.50.The equation for Adam's daily budget constraint can be written as:
A) 5(B)+ 0.50(P) $\le$ 20.
B) 0.50(B)+ 5(P) $\le$ 20.
C) 20(B)+ 0.50(P) $\le$ 5.
D) 0.50(B)+ 20(P) $\le$ 5.

Question

Quizplus · Accepted Answer

The equation for Adam's daily budget constraint can be written as: 
5(B) + 0.50(P) ≤ 20
This is because Adam can spend his $20 income on buying books and pencils. The price of one book is $5 and the price of one pencil is $0.50. Therefore, he can buy (20/5) = 4 books and (20/0.50) = 40 pencils in total. Let's assume Adam spends all his income on buying books only, then he can buy 20/5 = 4 books. But, if he decides to buy pencils, then the number of books he can purchase will reduce. Therefore, the budget constraint gives us the maximum number of books and pencils that Adam can buy with his $20 monthly income. Thus, the correct equation is 5(B) + 0.50(P) ≤ 20.

Adam Has a Monthly Income of $20 That Can Be ≤\le≤

Adam Has a Monthly Income of $20 That Can Be $\le$