9. The X-intercept of the budget constraint represents how much of good Y can be purchased if no good X is purchased and all income is spent. b. how much of good X can be purchased if no good Y is purchased and all income is spent. c. total income divided by the price of X. d. band c.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
**Understanding the X-intercept of the Budget Constraint**

When studying microeconomics, you'll come across various graphical representations that help explain consumer choices. One such concept is the budget constraint, which shows the various combinations of two goods that a consumer can purchase given their budget and the prices of the goods.

**Question:**
*What does the X-intercept of the budget constraint represent?*

**Options:**
a. How much of good Y can be purchased if no good X is purchased and all income is spent.
b. How much of good X can be purchased if no good Y is purchased and all income is spent.
c. Total income divided by the price of X.
d. b and e.

**Explanation:**

The correct choices regarding the X-intercept of the budget constraint are options b and c.

- Option **b** states that the X-intercept represents how much of good X can be purchased if no good Y is purchased and all income is spent on good X.
- Option **c** explains this in more technical terms, indicating that the X-intercept is obtained by dividing the total income by the price of good X.

So the X-intercept essentially tells you the maximum quantity of good X that can be bought with the given income, assuming you spend all of it on good X and none on good Y.

The understanding of this concept is crucial for analyzing consumer behavior and how different factors, such as changes in income or prices, affect purchasing decisions.
Transcribed Image Text:**Understanding the X-intercept of the Budget Constraint** When studying microeconomics, you'll come across various graphical representations that help explain consumer choices. One such concept is the budget constraint, which shows the various combinations of two goods that a consumer can purchase given their budget and the prices of the goods. **Question:** *What does the X-intercept of the budget constraint represent?* **Options:** a. How much of good Y can be purchased if no good X is purchased and all income is spent. b. How much of good X can be purchased if no good Y is purchased and all income is spent. c. Total income divided by the price of X. d. b and e. **Explanation:** The correct choices regarding the X-intercept of the budget constraint are options b and c. - Option **b** states that the X-intercept represents how much of good X can be purchased if no good Y is purchased and all income is spent on good X. - Option **c** explains this in more technical terms, indicating that the X-intercept is obtained by dividing the total income by the price of good X. So the X-intercept essentially tells you the maximum quantity of good X that can be bought with the given income, assuming you spend all of it on good X and none on good Y. The understanding of this concept is crucial for analyzing consumer behavior and how different factors, such as changes in income or prices, affect purchasing decisions.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Optimal Capital Budget
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education