Ron spends $150 on movie tickets and pizza. The price of a pizza is $10 and a movie ticket is $7.50. With the quantity of movies measured along the vertical axis, the slope of Ron’s budget line (with movies on the vertical axis) is __ per pizza
A) 1.33 movies
B) -1.33 movies
C) 0.75 of a movie
D) -0.75 of a movie
The correct answer and explanation is :
Correct Answer: B) -1.33 movies
Explanation:
Ron’s total budget is \$150, and he spends it on pizzas (at \$10 each) and movie tickets (at \$7.50 each). To find the slope of his budget line, we must consider the opportunity cost of one good in terms of the other.
In budget line analysis, the slope represents the trade-off between two goods—in this case, how many movies Ron must give up to get one more pizza. Since movies are measured on the vertical axis, and pizzas on the horizontal axis, the slope is calculated as:
$$
\text{Slope} = – \frac{\text{Price of pizza}}{\text{Price of movie}} = – \frac{10}{7.5} = -1.33
$$
So, the slope is -1.33 movies per pizza.
This means that for every pizza Ron buys, he must give up 1.33 movie tickets to stay within his \$150 budget. The negative sign indicates a trade-off: gaining one more unit of pizza comes at the cost of fewer movie tickets.
Understanding the Budget Line:
The budget line shows all possible combinations of pizzas and movie tickets Ron can afford with his \$150. The equation of the budget line is:
$$
10P + 7.5M = 150
$$
Where:
- $P$ = number of pizzas
- $M$ = number of movie tickets
To express movies as a function of pizzas (since movies are on the vertical axis), solve for $M$:
$$
7.5M = 150 – 10P \
M = 20 – 1.33P
$$
This is a straight line with a y-intercept of 20 (all movies, no pizza) and a slope of -1.33, showing the rate at which movies must be given up to gain pizzas.
Thus, the correct answer is B) -1.33 movies per pizza. Would you like a graph of the budget line?