Question

Suppose that a there are two goods, X and Y. The price of Good X is $10 and the price of Good Y is $4. The seller of Good X offers a deal where if a consumer buys 1 unit of Good X they pay full price, but the second unit of Good X is only $8. Calculate the slope of the budget constraint between 1 unit of Good X and 2 units of Good X. (Remember to include a negative sign. Round to the nearest two decimal places if necessary.)

Answer 1

The slope of the budget constraint is -2.

Step-by-step explanation:

There are two goods, X and Y.

The price of Good X is $10 and the price of Good Y is $4.

The price of the second unit of good X is $8.

The slope of the budget line is equal to the ratio of the price of two goods.

Hence, the slope of the budget line

=
`(-Px)/(Py)`

=
`(-8)/(4)`

= -2

The slope of the budget constraint is -2.