A consumer wants to consume two goods. The prices of two goods are र 4 and र 5
respectively. The consumer's income is र 20.
How much of good 1 the consumer can consume if she spends her entire income on that good?
The consumer can consume 5 (= 20 ÷ 4) units if she spends her entire income on purchase of good 1 (here x1).
A consumer wants to consume two goods. The prices of two goods are र 4 and र 5
respectively. The consumer's income is र 20.
Write down the equation of budget line.
The budget line equation is 'P1x1 + P2x2 = M' presuming two goods are x1and x2 and prices, P1 and P2 respectively. M represents money income. Thus budget line equation under given information is 4x1 + 5x2 = 20.
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