Chapter 10.A, Problem 10P

To determine

Concept introduction:

Budget Line: It is defined as the combination of all the goods that a consumer can purchase, exhausting all his income. The formula to calculate the budget line is:

Here,

• is the quantity of good X.
  
• is the quantity of good Y.
  
• is the total income.
  
• is the price of good X.
  
• is the price of good Y.
  

Normal Goods: It is a type of good in which the demand increases, when the income of the consumer increases. Example; milk, grains and pulses.