Assume the price of good X is Px, the price of good Y is Py, and B is the budget. The formula for...
Question:
Assume the price of good {eq}X {/eq} is {eq}P_x {/eq}, the price of good {eq}Y {/eq} is {eq}P_y {/eq}, and {eq}B {/eq} is the budget. The formula for the budget line for these two goods is:
a. {eq}P_yQ_y/P_xQ_x {/eq}
b. {eq}P_yB + P_yB = B {/eq}
c. {eq}P_xX + P_yY = B {/eq}
d. {eq}(1 - P_y/B)P_x {/eq}
Indifference curve
Indifference curve is the curve or graphical representation of the different levels of consumer satisfaction. The curve is generally convex for normal goods. Indifference curve is also paired with budget line, to know at what budget the consumer can purchase at the particular level of satisfaction.
Answer and Explanation: 1
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The correct answer is c. PxX+PyY=B
Budget Line (BL):
{eq}\begin{align*} B &= Px.Qx + Py.Qy\\ B &= Px.X + Py.Y \end{align*}{/eq}
The budget...
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Indifference Curves: Use & Impact in Economics
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Chapter 3 / Lesson 12
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In economics, indifference curves show which goods in the marketplace bring equal satisfaction to consumers, leaving them indifferent to which goods they purchase. Explore the definition, learn about their use and impact in economics, and review how they work.
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