Asked by Nicholas Maynard on Jul 26, 2024
Verified
Suppose a consumer has an income of $24, the price of A is $3, and the price of B is $1. Which of the following combinations is on the consumer's budget line?
A) 4A and 10B
B) 2A and 18B
C) 8A and 24B
D) 5A and 7B
Consumer's Budget Line
A graphical representation of all possible combinations of two goods that a consumer can purchase, given their income and the prices of the goods.
Price of A
The cost assigned to a specific product or service "A", determined by various factors like production costs, supply, and demand.
Price of B
The cost required to purchase good B or the amount a consumer is expected to pay for acquiring good B.
- Comprehend the concept of the budget line, illustrating every possible combination of goods that a consumer is able to purchase with a given level of income.
Verified Answer
HB
Haapppyy BAAABBBSSSYYYJul 27, 2024
Final Answer :
B
Explanation :
The budget line equation is P_A * Q_A + P_B * Q_B = Income. For B) 2A and 18B, the calculation is (2*$3) + (18*$1) = $6 + $18 = $24, which matches the consumer's income, placing it on the budget line.
Learning Objectives
- Comprehend the concept of the budget line, illustrating every possible combination of goods that a consumer is able to purchase with a given level of income.