Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?
A)Good Y is twice as expensive as good X.
B)The consumer gives up two units of good Y for each unit of good X she purchases.
C)The opportunity cost of good X is one half of a unit of good Y.
D)All of the above are correct.

Question

Suppose good X is on the horizontal axis, good Y is on the vertical axis, and the slope of an individual's budget line is -2. Which of the following is true?​
A)​Good Y is twice as expensive as good X.
B)​The consumer gives up two units of good Y for each unit of good X she purchases.
C)​The opportunity cost of good X is one half of a unit of good Y.
D)​All of the above are correct.

Quizplus · Accepted Answer

A budget line with a slope of -2 means that for every unit of good X that the individual purchases, they must give up two units of good Y. This implies that good Y is twice as expensive as good X, which is answer choice A. The opportunity cost of good X is the amount of good Y that must be given up to purchase a unit of good X, or in this case, one unit of good X costs two units of good Y, so the opportunity cost of one unit of good X is two units of good Y. This corresponds to answer choice C. Therefore, B and C are the correct choices, and D is incorrect as answer choice A is not necessarily true.

Suppose Good X Is on the Horizontal Axis, Good Y