Chapter 9

Question 1

Describe the character trait of budget line for divisible goods

Answer 1

It is continuous

Question 2

Budget equation

Answer 2

Expenditure = Income

Question 3

Expenditure(money spend) = (price of cola x Quantity of cola) + (price of movie x quantity of movie)

Income = y

Write in equation:

Answer 3

PcQc+PmQm = Y

Question 4

Real income

Answer 4

Income/ price of goods
Y/P

Question 5

what’s the effect of a change in income on the budget line?

Answer 5

if it rises, the slope stays the same, real income rises, the budget line shifts rightwards

if it falls, the slope stays the same, real income falls, the budget line shifts leftwards.