{"id":34509,"date":"2025-06-23T16:13:04","date_gmt":"2025-06-23T16:13:04","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=34509"},"modified":"2025-06-23T16:13:05","modified_gmt":"2025-06-23T16:13:05","slug":"suppose-a-consumer-has-an-income-of-24-the-price-of-a-is-4-and-the-price-of-b-is-3","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/suppose-a-consumer-has-an-income-of-24-the-price-of-a-is-4-and-the-price-of-b-is-3\/","title":{"rendered":"Suppose a consumer has an income of $24, the price of A is $4, and the price of B is $3"},"content":{"rendered":"\n<p>Suppose a consumer has an income of $24, the price of A is $4, and the price of B is $3. Which of the following combinations is on the consumer&#8217;s budget line?<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p>To determine which combination is on the consumer\u2019s <strong>budget line<\/strong>, we use the <strong>budget constraint formula<\/strong>: PA\u22c5QA+PB\u22c5QB=IncomeP_A \\cdot Q_A + P_B \\cdot Q_B = \\text{Income}<\/p>\n\n\n\n<p>Where:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>PA=4P_A = 4 (price of good A)<\/li>\n\n\n\n<li>PB=3P_B = 3 (price of good B)<\/li>\n\n\n\n<li>Income = 24<\/li>\n<\/ul>\n\n\n\n<p>Let\u2019s test which combinations satisfy this equation. Although no options were given, a general explanation with example calculations will help.<\/p>\n\n\n\n<p>Suppose a consumer chooses <strong>3 units of A<\/strong> and <strong>4 units of B<\/strong>: (4\u00d73)+(3\u00d74)=12+12=24(4 \\times 3) + (3 \\times 4) = 12 + 12 = 24<\/p>\n\n\n\n<p>This totals $24, which <strong>matches the consumer\u2019s income<\/strong>, so this combination is <strong>on the budget line<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>A <strong>budget line<\/strong> shows all the possible combinations of two goods a consumer can buy with a given income, assuming fixed prices. The budget line equation is derived from setting total expenditure equal to total income. In this example: 4A+3B=244A + 3B = 24<\/p>\n\n\n\n<p>To find all combinations on the budget line, one can plug in values for AA or BB and solve for the other. For example:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If A=0A = 0, then 3B=24\u21d2B=83B = 24 \\Rightarrow B = 8<\/li>\n\n\n\n<li>If B=0B = 0, then 4A=24\u21d2A=64A = 24 \\Rightarrow A = 6<\/li>\n<\/ul>\n\n\n\n<p>This means the consumer can afford up to 6 units of A (if buying only A) or 8 units of B (if buying only B). Any combination in between that keeps total spending at $24 lies on the budget line.<\/p>\n\n\n\n<p>If the combination costs <strong>less than $24<\/strong>, it is <strong>inside<\/strong> the budget line. If it costs <strong>more than $24<\/strong>, it is <strong>outside<\/strong> the budget line and unaffordable.<\/p>\n\n\n\n<p>So, a combination like (3A, 4B) or (6A, 0B) or (0A, 8B) is on the budget line, because it uses the entire income exactly.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Suppose a consumer has an income of $24, the price of A is $4, and the price of B is $3. Which of the following combinations is on the consumer&#8217;s budget line? The correct answer and explanation is: To determine which combination is on the consumer\u2019s budget line, we use the budget constraint formula: PA\u22c5QA+PB\u22c5QB=IncomeP_A [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-34509","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/34509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=34509"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/34509\/revisions"}],"predecessor-version":[{"id":34510,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/34509\/revisions\/34510"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=34509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=34509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=34509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}