Question

Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. Refer to the information given above. What is the slope of the budget line, if the quantity of apples were measured on the horizontal axis and bananas on the vertical axis?

Answer 1

Answer:

-2

Explanation:

The slope is negative and is given by $1.50 / -$0.75 = -2, one additional apple results in two less bananas.

The total amount of apples that can be purchased with $12 is 8, while the total number of bananas is 16. This is known as the consumer possibilities frontier.