Figure 21-5
(a) (b)
-Refer to Figure 21-5. In graph (b), what is the price of good Y relative to the price of good X (i.e., PY/PX)?

Question

Figure 21-5
(a) (b)  
-Refer to Figure 21-5. In graph (b), what is the price of good Y relative to the price of good X (i.e., PY/PX)?

Quizplus · Accepted Answer

The slope of the budget line in graph (b) is -3, which means that the price of good Y is 3 times that of good X. Therefore, PY/PX = 3. Since the highest attainable indifference curve is IC2, the consumer will choose the bundle on the budget line that lies on the indifference curve tangent to it, which occurs at point B. Therefore, the best choice is (2,6), which is option C.