In producing a budget constraint line for combinations of staples and paper clips,which are sold by the box,a student labels the points (0,5)and (10,0)along the line.Staples occupy the vertical axis,while paper clips are situated on the horizontal axis.Therefore,boxes of
A) staples cost twice as much as boxes of paper clips.
B) paper clips cost twice as much as boxes of staples.
C) staples cost $10.
D) paper clips cost $5.
E) staples cost the same as boxes of paper clips.

Question

Quizplus · Accepted Answer

The slope of the budget constraint line, which represents the rate at which the two goods can be substituted for each other, is determined by the relative prices of the two goods. The points (0,5) and (10,0) indicate that 5 boxes of staples can be exchanged for 10 boxes of paper clips, or vice versa, implying that each box of staples costs twice as much as each box of paper clips to maintain the same budget level.

In Producing a Budget Constraint Line for Combinations of Staples