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INDIVIDUAL ASSIGNMENT B:ECON.p...
INDIVIDUAL ASSIGNMENT (10 MARKS)
DEADLINE- 8* DECEMBER
QUESTIONS
1. The line or locus of points of the two commodity combinations that exhaust the consumers income is kown as a budget line. What does the negative sign on the stope of the budget line mean?
2 Suppose the consumers buidget or fixed income is I and spends it on twe commodities \( X \) and \( Y \) whose respective prices are \( P \), and \( P_{\text {s }} \). Then the equation of the budget line can be expressed as;
\[
I=P_{x} Q_{x}+P_{,} Q_{y}
\]
From the bsidget tine equation, we make X the subject to get the horitontalixintercept famount of good X purchased when the consumer purchases zero units of good \( Y \).
\[
Q_{k}=I / P_{z}-P_{y} / P_{z}, Q_{y}
\]
Alse, from the from the budger line equation, we make \( Y \) the sublect to get the verticaly-intercept. amount of good Y purchased when the corisumer purchases zero units of good \( x \) ).
\[
Q y=U / P_{3}-P_{2} / P_{3} Q_{x}
\]
Using the above concepts, use the graph below (showing quantities of Good X and Y ) to determine;
i) Price of Good X ( Px )
i) Price of Good \( Y \) ( Py)
3. Explain 2 applications and 2 limitations of the Law of Equi-marginal utitity
4. Explain 2 uses of income elasticity of Demand
