Question

If the quantity of good A (Q A) is plotted along the horizontal axis, the quantity of good B (Q B) is plotted along the vertical axis, the price of good A is P A, the price of good B is P B and the consumer's income is I, then the slope of the consumer's budget constraint is ________.

Answer 1

Answer:

The slope of the consumer's budget constraint is -PA/PB.

Explanation:

The quantity of good A (Q A) is plotted along the horizontal axis, the quantity of good B (Q B) is plotted along the vertical axis.

The price of good A is PA, the price of good B is PB and the consumer's income is I.

The budget line represents the maximum possible bundles of two goods that a consumer can afford by spending his total income. The slope of the budget line will be the ratio of the prices of two goods. It represents the quantity of a good that the consumer needs to sacrifice to increase the consumption of the other good.

So the slope of the budget constraint will be -PA/PB.