Final answer:
To draw the budget line showing different combinations of two goods, divide the total budget by the price of each good to find the maximum quantity of each. Plot these maximum quantities on a graph and connect them to create the budget line.
Step-by-step explanation:
To draw the budget line showing different combinations of the two goods (x and y) that can be bought with the given budget, you need to calculate the maximum quantity of each good that can be purchased within the budget. In this case, the person has $120 to spend, and the prices of goods x and y are $3 and $5 per unit, respectively. Let's assume the quantity of good x is represented on the horizontal axis and the quantity of good y is represented on the vertical axis.
To find the maximum quantity of good x, divide the total budget by the price of x: $120/$3 = 40 units. To find the maximum quantity of good y, divide the total budget by the price of y: $120/$5 = 24 units. Now, plot the points (40, 0) and (0, 24) on the graph and connect them with a straight line. This line represents the budget line and shows all the different combinations of goods x and y that can be bought within the given budget.