Question

Suppose a consumer had a budget of $125. The price of Good X is $5 and the price of Good Y is $7.50. Calculate value of the x-intercept of the budget line.

Answer 1

Answer:

The value of the x-intercept of the budget line is 25.

Explanation:

Based on the question, the budget line equation is as follows:

X5 + Y7.5 = 125 ......................... (1)

Where;

X = Unit of commodity X or value of the x-intercept of the budget line

Y = Unit of commodity Y or value of the y-intercept of the budget line

To calculate value of the x-intercept of the budget line, we assume that Y = 0. Substituting Y = 0 into equation (1) and solve for X, we have:

X5 + (0 * 7.5) = 125

X5 = 125

X = 125 / 5

X = 25

Therefore, the value of the x-intercept of the budget line is 25.