{"id":466,"date":"2025-05-08T04:23:43","date_gmt":"2025-05-08T04:23:43","guid":{"rendered":"https:\/\/yaveni.com\/blog\/?p=466"},"modified":"2025-05-08T04:23:45","modified_gmt":"2025-05-08T04:23:45","slug":"the-magnitude-of-the-slope-of-the-budget-line-is-equal-to-the-or-of-the-good-plotted-on-the-__-in-terms-of-the-other-good","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/the-magnitude-of-the-slope-of-the-budget-line-is-equal-to-the-or-of-the-good-plotted-on-the-__-in-terms-of-the-other-good\/","title":{"rendered":"The magnitude of the slope of the budget line is equal to the or of the good plotted on the __ in terms of the other good"},"content":{"rendered":"\n

The magnitude of the slope of the budget line is equal to the or<\/strong> of the good plotted on the __<\/em><\/strong> in terms of the other good.<\/p>\n\n\n\n

A) relative price; marginal cost; y-axis<\/p>\n\n\n\n

B) relative price; total cost; y-axis<\/p>\n\n\n\n

C) relative price; opportunity cost; x-axis<\/p>\n\n\n\n

D) price; opportunity cost; x-axis<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer: C) relative price; opportunity cost; x-axis<\/strong><\/p>\n\n\n\n

\n\n\n\n

Explanation:<\/strong><\/h3>\n\n\n\n

In microeconomics, a budget line<\/strong> represents all the combinations of two goods that a consumer can purchase with a given income and at given prices. The slope of the budget line<\/strong> is a key concept because it illustrates how the market allows consumers to trade one good for another.<\/p>\n\n\n\n

\n\n\n\n

1. Understanding the Slope of the Budget Line:<\/strong><\/h3>\n\n\n\n

Mathematically, the budget line can be written as:<\/p>\n\n\n\n

$$
P_x X + P_y Y = I
$$<\/p>\n\n\n\n

Where:<\/p>\n\n\n\n

    \n
  • $P_x$ = Price of good X<\/li>\n\n\n\n
  • $P_y$ = Price of good Y<\/li>\n\n\n\n
  • $X$ and $Y$ = Quantities of goods X and Y<\/li>\n\n\n\n
  • $I$ = Income<\/li>\n<\/ul>\n\n\n\n

    Solving for $Y$:<\/p>\n\n\n\n

    $$
    Y = \\frac{I}{P_y} – \\frac{P_x}{P_y}X
    $$<\/p>\n\n\n\n

    In this equation, the slope of the budget line is:<\/p>\n\n\n\n

    $$
    -\\frac{P_x}{P_y}
    $$<\/p>\n\n\n\n

    This negative slope shows the rate at which the consumer must give up good Y to get one more unit of good X<\/strong>, which is known as the opportunity cost of X in terms of Y<\/strong>. It also reflects the relative price of X<\/strong> compared to Y.<\/p>\n\n\n\n

    \n\n\n\n

    2. Why “Relative Price” and “Opportunity Cost”?<\/strong><\/h3>\n\n\n\n
      \n
    • The relative price<\/strong> is the price of one good compared to another (here, $\\frac{P_x}{P_y}$).<\/li>\n\n\n\n
    • The opportunity cost<\/strong> of the good on the x-axis is how much of the other good (on the y-axis) must be given up to obtain one more unit of the good on the x-axis.<\/li>\n<\/ul>\n\n\n\n

      Therefore, the magnitude<\/strong> (absolute value) of the slope of the budget line equals both the relative price<\/strong> and the opportunity cost<\/strong> of the good on the x-axis<\/strong>.<\/p>\n\n\n\n

      \n\n\n\n

      Conclusion:<\/strong><\/h3>\n\n\n\n

      Option C<\/strong> is correct because it properly identifies the slope as representing both the relative price<\/strong> and opportunity cost<\/strong> of the good on the x-axis<\/strong>, which is foundational in consumer choice theory.<\/p>\n","protected":false},"excerpt":{"rendered":"

      The magnitude of the slope of the budget line is equal to the or of the good plotted on the __ in terms of the other good. A) relative price; marginal cost; y-axis B) relative price; total cost; y-axis C) relative price; opportunity cost; x-axis D) price; opportunity cost; x-axis The correct answer and explanation […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-466","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/466","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=466"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/466\/revisions"}],"predecessor-version":[{"id":467,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/466\/revisions\/467"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}