Ruby buys goods X and Y. She can just afford the bundle X = 6and...

Ruby buys goods X and Y. She can just afford the bundle X = 6 and Y = 3 and one x will cost her 3 units of y.

a. What is the ratio of the price of x to the price of y?

b. If Ruby spent all her money on x, how much x could she buy? If she spent all your money on y, how much y could she buy? Show work.

c. Write an equation that gives you Ruby's budget line when the price of x is 6. Show work

Expert Solution

a. Px/Py = 3

I.e. x is 3 times as expensive as y

b. Let price of x be 3, then price of y is 1.
So Income = (6 x 3) + ( 3 x 1) = 12

All money spent on x = 12/3 = 4 units
All money spent on y = 12/1 = 12 units

c. M = 6x + 2y
Because if price of x is 6, it means price of y is 2

Rahul Sunny answered 2 years ago

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