Question #45071

Px=6a, Py=Px/a
a) Find the budget constraint equation if Bo=2(Px+Py)
b) Find the value of a if the consumer purchases 10 units of Y and 7 Units of X

Expert's answer

Px=6a, Py=Px/a

a)Find the budget constraint equation if Bo=2(Px+Py)

If Px = 6a, then Py = 6a/a = 6

Bo = 2(6a + 6) = 12a +12

b)Find the value of a if the consumer purchases 10 units of Y and 7 Units of X.

If X = 7, Y = 10 and the general equation ofthe budget constraint is Bo = Px*X + Py*Y, then:

12a + 12 = 6a*7 + 6*10

12a - 42a = 60 - 12

30a = -48

a = -1.6

a)Find the budget constraint equation if Bo=2(Px+Py)

If Px = 6a, then Py = 6a/a = 6

Bo = 2(6a + 6) = 12a +12

b)Find the value of a if the consumer purchases 10 units of Y and 7 Units of X.

If X = 7, Y = 10 and the general equation ofthe budget constraint is Bo = Px*X + Py*Y, then:

12a + 12 = 6a*7 + 6*10

12a - 42a = 60 - 12

30a = -48

a = -1.6

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