suppose a consumer has an income of rupees 20 he wants to spend it on two commodities X and y both at rupees 10 each now the consumer has three options to spend his entire income what is the possible bundles can be
The two branches of economics are microeconomics and macroeconomics. Economics focuses on efficiency in production and exchange. Gross Domestic Product (GDP) and the Consumer Price Index (CPI) are widely used economic indicators.
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Answer:
Let X1 denote Good-1 and X2 denote Good-2.
P1=Rs4,P2=Rs5,Y=Rs20
(i P * 1 * 1 + P * 2 * 2 = Y
4 * 1 + 5 * 2 = 20
Thus, the equation of the budget line
is 4 * 1 + 5 * 2 = 20
(ii) We know equation of the budget line is:
P * 1 * 1 + P * 2 * 2 = Y
If the consumer spends her entire income on Good-1, then
X * 2 = 0
P * 1 * 1 =Y Rightarrow4*1=20
X1=5
Thus, the consumer can buy 5 units of Good-1 if she spends her entire income on that good.
(iii) If the consumer spends her entire
income on Good-2, then
X1=0
P2X2-Y⇒5X2=20
X2=4
Thus, the consumer can buy 4 units of Good-2 if she spends her entire income on that good.
(iv) Slope of budget line =
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Answer:
The two branches of economics are microeconomics and macroeconomics. Economics focuses on efficiency in production and exchange. Gross Domestic Product (GDP) and the Consumer Price Index (CPI) are widely used economic indicators.
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