Refer to the following graph:

-What is the equation for budget line LM?
A) Y = 10 + 1.5X
B) Y = 10 -(2/3)X
C) Y = 1.5 + 1.5X
D) Y = 1.5 - 10X
E) Y = 0.667 + 1.5X

Question

Refer to the following graph:
 
-What is the equation for budget line LM?
A) Y = 10 + 1.5X 
B) Y = 10 -(2/3)X 
C) Y = 1.5 + 1.5X 
D) Y = 1.5 - 10X 
E) Y = 0.667 + 1.5X

Quizplus · Accepted Answer

The equation for budget line LM is Y = 10 - (2/3)X. This is because the intercept on the Y-axis is 10, representing the amount of the consumer's income that they allocate towards purchasing good Y when they do not purchase any of good X. The intercept on the X-axis is (15/10) = 1.5, representing the amount of the consumer's income that they allocate towards purchasing good X when they do not purchase any of good Y. The slope of the budget line is (-2/3), representing the opportunity cost of purchasing one unit of good X in terms of the amount of good Y that must be given up.

Refer to the Following Graph