In the graph, what is the slope of the budget line? A budget line for M = ₹100, P₁ = ₹5, P₂ = ₹10, running from 10 units of good 2 (no good 1) to 20 units of good 1 (no good 2). Bundle A is (8, 6), bundle B is (10, 6) and bundle C is (6, 4).

In the graph, what is the slope of the…

In the graph, what is the slope of the budget line?

MediumOriginal question

In the graph, what is the slope of the budget line?

−20Correct answerYour answer−10Correct answerYour answer−2Correct answerYour answer−0.5Correct answerYour answer

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CorrectNot quiteAnswer D

Correct answer: D

Slope = −P₁ ÷ P₂ = −5 ÷ 10 = −0.5.
Check from the intercepts: −10 ÷ 20 = −0.5. Half a unit of good 2 is given up for each unit of good 1.

Worth noting

−2 inverts the ratio: it is the slope with good 2 on the horizontal axis.

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

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