Use the following to answer question:
-(Figure: Kristin's Budget Line)Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Kristin's income is:
A)$50.
B)$120.
C)$60.
D)$20.

Question

Use the following to answer question: 
-(Figure: Kristin's Budget Line)Use Figure Kristin's Budget Line.The price of a cup of cappuccino is $3,and the price of an apple is $1.Kristin's income is:
A)$50. 
B)$120. 
C)$60. 
D)$20.

Quizplus · Accepted Answer

Kristin's budget line in the figure would show the combinations of cappuccinos and apples she can afford given their prices and her income. If the price of a cappuccino is $3 and an apple is $1, and assuming the intercepts of her budget line on the axes represent the maximum of each good she can buy with her income, we can calculate her income. For example, if she spends all her income on cappuccinos and can buy 20 (the intercept on the cappuccino axis), her income would be 20 cappuccinos * $3/cappuccino = $60. Similarly, if she spends all her income on apples and can buy 60 (the intercept on the apple axis), her income would also be 60 apples * $1/apple = $60. Therefore, Kristin's income is $60.

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