On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then
A)a pineapple costs six times as much as a pencil.
B)the opportunity cost of a pineapple is 6 pencils.
C)the opportunity cost of a pencil is one-sixth of a pineapple.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

The slope of the budget constraint is the negative of the ratio of the price of pineapples to the price of pencils. So, if the slope is -6, then a pineapple costs six times as much as a pencil. The opportunity cost of a pineapple is the number of pencils that must be given up to buy one pineapple. So, if a pineapple costs six times as much as a pencil, then the opportunity cost of a pineapple is 6 pencils. The opportunity cost of a pencil is the number of pineapples that must be given up to buy one pencil. So, if a pineapple costs six times as much as a pencil, then the opportunity cost of a pencil is one-sixth of a pineapple.

On a Graph We Draw a Consumer's Budget Constraint, Measuring