Question

A consumer has an income of $Rs.200$ per day. Price of $X$ and $Y$ is $Rs.2$ and $Rs.5$ respectively. Plot the budget line of the consumer.

Answer 1

We are given, $P_X=Rs.2;P_Y=Rs.5;Income=Rs.200$
If entire income of the consumer is spent on $X$, then $\frac{200}{2}=100$ units of $X$ can be purchased. If entire income is spent on $Y$, then $\frac{200}{Y}=40$ units of $Y$ can be purchased. Putting the combinations $(100,0)$ and $(0,40)$ in the diagram, we get the budget line of the consumer.
$PL$ is the budget line of the consumer.