If the vertical axis measures yams which cost $20 per unit and the horizontal axis measures xylophones which cost $5 a unit,the slope of the budget line is _____.
A)-20
B)-3
C)-0.25
D)-0.33

Question

Quizplus · Accepted Answer

The formula for the slope of the budget line is:

slope = (change in yams)/(change in xylophones)

Since yams cost $20 per unit and xylophones cost $5 per unit, we can set up a ratio:

(change in yams) / (change in xylophones) = $20 / $5 = 4

Rearranging the formula for slope, we get:

slope = 1/4 = -0.25

Note that the slope is negative because the budget line has a negative slope (i.e. as the quantity of xylophones increases, the quantity of yams that can be purchased decreases). Therefore, the answer is choice C.

Without additional information on preferences or income, we cannot determine the best choice.

If the Vertical Axis Measures Yams Which Cost $20 Per