Question

In: Economics

A consumers budget constraint is given by 12F+3S=24 where F is food and S is shelter...

A consumers budget constraint is given by 12F+3S=24 where F is food and S is shelter (with S on the vertical axis). Answer the following questions:

a. What is the value of the vertical axis intercept?

b.What is the value of the horizontal axis intercept?

c. What is the slope?

d. In terms of economics, what is the slope showing you?

Solutions

Expert Solution

1) Basically we are taking shelter on the vertical axis and food on horizontal axis .

Budget line , 12 F +3 S = 24

Now on vertical intercept ,F = 0 so S = 24/3 = 8

So intercept is ( 0 , 8 )

2) On horizontal axis , S = 0 , so F = 24/12 = 2

Hence intercept is (2,0)

3) So slope = - Px / Py = -12/3 = -4/1

4) This states that to gain 4 extra units of Food we have to give around 1 units of shelter .

Rahul Sunny answered 2 years ago
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