Figure 21-8
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?
A)$3.33
B)$5
C)$15
D)$30

Question

Figure 21-8 
-Refer to Figure 21-8. If the price of good X is $3, and your budget constraint is BC, what is the price of good Y?
A)$3.33 
B)$5 
C)$15 
D)$30

Quizplus · Accepted Answer

The slope of the budget constraint is -3/5, which means that for every $3 spent on good X, $5 must be spent on good Y to exhaust the budget. If the price of X is $3, then at that price the maximum quantity that can be purchased is 10 (BC/Px = BC/3). Substituting this into the budget constraint equation (BC = 3X + PY), we get BC = 3(10) + PY, which simplifies to BC = 30 + PY. Solving for PY, we get PY = BC - 30. Thus, the price of good Y depends on the budget constraint BC, but it cannot be less than $30. Therefore, the only feasible choice is B, as it is the only option greater than or equal to $30.

Figure 21-8 -Refer to Figure 21-8. If the Price of Good X