Tonya's budget constraint for litres of gasoline (G)and shirts (S)each month can be expressed by the equation G = 100 - 2S,where G is the number of litres of gasoline she buys and S is the total number of shirts she buys.Assume that she spends her entire budget each month.If the price of shirts is $10,which consumption bundle lies INSIDE Tonya's budget line?
A) 45 shirts and 100 litres of gasoline
B) 50 shirts and 0 litres of gasoline
C) 0 shirts and 100 litres of gasoline
D) 10 shirts and 5 litres of gasoline

Question

Quizplus · Accepted Answer

Tonya's budget constraint is G = 100 - 2S. For each shirt, she gives up 2 litres of gasoline. If she buys 10 shirts, she can buy up to 80 litres of gasoline (G = 100 - 2*10 = 80). Buying 10 shirts and 5 litres of gasoline means she is not spending her entire budget, so this bundle lies inside the budget line.

Tonya's Budget Constraint for Litres of Gasoline (G)and Shirts (S)each