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Question -

Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if he/she spends her entire income. The prices of two goods are Rs 6 and Rs 8. How much is the consumer’s income?



Answer -

P1 = Rs6     P2 = Rs 8

x1 = 6           x2 = 8

Budget line = M = P1x1 + P2x2

M = 6 × 6 + 8 × 8

M = 36 + 64

M = 100

Thus, the consumer’s income is Rs 100.

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