A consumer has total money income of Rs.250 to be spent on two goods X and Y with prices of Rs.25 and Rs.10 per unit respectively.On the basis of the given information , answer the following questions :
(a) Given the equation of the budget line for the consumer.
(b)What is the value of slope of the budget line ?
(c )How many units can the consumer buy if he is to spend all his money income on good X ?
(d)How does the budget line change if there is a fall in price of good Y ?

Answer

N/a

Explanation

(a)Equation of Budget line =`P_xQ_x+P_yQ_y=M` i.e., `25Q_x+10Q_y=250`
(b)Slope of Budget line =`(-)P_x/P_y=(-25)/10=(-)2.5`
(c )If `Q_y=0`
`25Q_x+10Q_y=500`
`25Q_x+10(0)=250`
`Q_x=250/25=10` units
(d)If price of good Y falls, the consumer will be able to buy more of good Y with in the given income.Budget line will rotate rightwards.(Keeping the X-intercept constant)