Your budget line for goods A
and B is represented below. Which of the following statements is or
could be TRUE?
(a) If income is $45, the price of Good A must always be $5.
(b) The price of Good A increases after the consumer buys 2
units.
(c) When you have 5 units of Good A, you are able to buy an
additional unit of Good A if you give up 1/3 units of Good B.
(d) When you have 5 units of good B, the marginal rate of
transformation of A for B is 1/3 (???ab = 1/3)
(e) All of the above statements are false.
Homework Answers
Ans. a) If income is $45, the price of goods A must always be $5
when income is $45, the consumer can consume a maximum of 9 units of goods A
then, Qd = M/P, when income is $45= $45/9 = $5
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