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In: Economics

If Ann has a $12 budget; she prefers two goods gum and water. Price of gum...

If Ann has a $12 budget; she prefers two goods gum and water. Price of gum is $1.50 per pack. Price of water is $1. Using this information, construct Ann's Budget Line.

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Expert Solution

A budget line is a straight line that slopes downward and consist of all ​​​​​​e combinations of two goods which a consumer can purchase at a market with his income.

Eqauation:- Px*Qx+Py*Qy=M

Here

Px=price of gum

Qx=quantity of gum

Py=Price of water

Qy= quantity of water

M= income of consumer

In the above graph, it helps know ann's budget line. Here she prefer two of good gum and two of water.

Rahul Sunny answered 2 years ago
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