Suppose that a consumer purchases just two goods, X and Y. The Y-intercept of the budget line in this case would indicate the:
A) Maximum dollar amount of budget that the consumers has for good Y
B) Price that the consumer has to pay for each unit of good Y
C) Maximum quantity of good Y that the consumer could buy with a given budget
D) Quantity of good Y that the consumer would want to buy

Question

Quizplus · Accepted Answer

The Y-intercept of the budget line represents the maximum quantity of good Y that the consumer could purchase with a given budget. The slope of the budget line represents the ratio of the prices of two goods X and Y. Thus, the y-intercept reflects the budget constraint of the consumer, assuming prices of goods X and Y are given.

Suppose That a Consumer Purchases Just Two Goods, X and Y