The slope of a budget line, with good 1 on the horizontal axis, is

−P₁ ÷ P₂Correct answerYour answer−P₂ ÷ P₁Correct answerYour answerM ÷ P₁Correct answerYour answerP₁ × P₂Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Rewrite the line: x₂ = M ÷ P₂ − (P₁ ÷ P₂) x₁.
The coefficient of x₁, −P₁ ÷ P₂, is the slope: the units of good 2 given up to buy one more unit of good 1.

Worth noting

−P₂ ÷ P₁ is the slope if good 2 is put on the horizontal axis instead.

Ten questions from Budget Line & Optimal Choice, at your own pace.

Ten questions from Budget Line & Optimal Choice, at your own pace.

Explanation