Budget Line: It is defined as the combination of all the goods that a consumer can purchase, exhausting all his income. The formula for 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. Slope of the Budget line: It is defined as the ration of price, in the above case the slope is when the budget line is steeper, the absolute value of the slope is less. And when it is flat then the absolute value of the slope is more Inflation: It is defined as the continuous increase in the price of a good for a period of time.

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Chapter 10.A, Problem 5P

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 for 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.

Slope of the Budget line: It is defined as the ration of price, in the above case the slope is when the budget line is steeper, the absolute value of the slope is less. And when it is flat then the absolute value of the slope is more

Inflation: It is defined as the continuous increase in the price of a good for a period of time.

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