Question

1. A consumer has $60 per day to spend on product A, which has a unit...

1.

A consumer has $60 per day to spend on product A, which has a unit price of $5, and product B, which has a unit price of $10. What is the slope of the budget line if good A is on the horizontal axis and good B is on the vertical axis?

60/5.

-10/5.

-5/10.

5/10.

Cannot be determined
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Answer #1

The slope of budget line will be equal to the ratio of the priceof the goods, therefore, in this case, the slope of the budget line will be equal to the price of good A (price of good on horizontal axis) divided by the price of good B (price of good on vertical axis) which is -5/10. Notice that there is a negative sign in the ratio of the price of the two goods and this is because of the negative slope of the budget line as minus denotes the negative slope of the budget line.

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