Answer to Question #188908 in Microeconomics for Kuhle

Question

Given that Rumbi's budget line is 25=1/4Qcake+Qtea and the price of tea is R10. What is Rumbi's income and price for cake?

Answer 1

$$Q_{cake}=0$$

$$Q_{tea}=25$$

$$I=p_{tea}\times Q_{tea}=10\times25=250$$

$$Q_{tea}=0$$

$$Q_{cake}=100$$

$$p_{cake}=\frac{250}{100}=2.5$$