Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if she spends her entire income. The prices of the two goods are P1=6 and P2= 8 respectively. How much is the consumers income?
Added by Montserrat H.
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The budget constraint equation is given by: P1 * Q1 + P2 * Q2 = Income Where P1 and P2 are the prices of goods 1 and 2, and Q1 and Q2 are the quantities of goods 1 and 2 purchased. Show more…
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Originally the consumer faces the budget line $p_{1} x_{1}+p_{2} x_{2}=m .$ Then the price of good 1 doubles, the price of good 2 becomes 8 times larger, and income becomes 4 times larger. Write down an equation for the new budget line in terms of the original prices and income.
Originally the consumer faces the budget line $p_{1} x_{1}+p_{2} x_{2}=m$. Then the price of good 1 doubles, the price of good 2 becomes 8 times larger, and income becomes 4 times larger. Write down an equation for the new budget line in terms of the original prices and income.
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