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ECO100 Chapter Notes -Budget Constraint, Weight Watchers, Indifference Curve

India

Introduction Of Economics

Economics

Ahmedabad University

Draw the budget constraint for a person with income of $1000 if the price of pepsi is $5 and the price of pizza is $10. What is the slope of this budget constraint?

At the consumer's optimum:
<table>
<tbody>
<tr>
<td> </td>
<td>a.</td>
<td>
the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
</td>
</tr>
<tr>
<td> </td>
<td>b.</td>
<td>
it is still possible for the consumer to increase his consumption of both goods.
</td>
</tr>
<tr>
<td> </td>
<td>c.</td>
<td>
the budget constraint will have a slope of MUx/Px.
</td>
</tr>
<tr>
<td> </td>
<td>d.</td>
<td>
the slope of the indifference curve is equal to the slope of the budget constraint.
</td>
</tr>
</tbody>
</table>

If the consumer's budget constraint is given by 4P + 2B = 50 where P is pizza and B is burgers, the following bundles of pizza and burgers would be on the budget constraint:
P = 5; B = 10
P = 2; B = 21
P = 10; B = 20
P = 2; B = 24

ECO100 Chapter Notes -Budget Constraint, Weight Watchers, Indifference Curve

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Related Questions

	a.	the indifference curve will intersect the budget constraint at the midpoint of the budget constraint.
	b.	it is still possible for the consumer to increase his consumption of both goods.
	c.	the budget constraint will have a slope of MU_x/P_x.
	d.	the slope of the indifference curve is equal to the slope of the budget constraint.