Economics
Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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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:

    Economics, Chapter 10.A, Problem 5P , additional homework tip  1

Here,

  • Economics, Chapter 10.A, Problem 5P , additional homework tip  2is the quantity of good X.
  • Economics, Chapter 10.A, Problem 5P , additional homework tip  3is the quantity of good Y.
  • Economics, Chapter 10.A, Problem 5P , additional homework tip  4is the total income.
  • Economics, Chapter 10.A, Problem 5P , additional homework tip  5is the price of good X.
  • Economics, Chapter 10.A, Problem 5P , additional homework tip  6is 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 Economics, Chapter 10.A, Problem 5P , additional homework tip  7when 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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