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Given that Tebogo's income is P1800, price of food is P30 and price of entertainment is...

Given that Tebogo's income is P1800, price of food is P30 and price of entertainment is P40. Draw Tebogo's budget line

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Answer #1

A budget line represents the various combinations of two goods which can be purchased with a given money income and prices of goods.

Taking food on x axis and entertainment on y axis.

Intercept of x axis represents the maximum food that can be bought by spending entire income on food.

Intercept of x axis = total money income/ price of food = 1800/30 = 60

Intercept of y axis represents the maximum entertainment that can be bought by spending entire income on entertainment.

Intercept of y axis = total money income/ price of entertainment = 1800/40 = 45

Thus the coordinates for deriving the budget line are (60,0) and (0,45).

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