Question

Write a budget line equation of a consumer if the two goods purchased by the consumer, Good X and Good Y are priced at Rs 10 and Rs 5 respectively and the consumer's income is Rs 100.

Answer 1

The budget line equation of the consumer can be derived based on the given information:
Income (M) = Rs.100

Price of X = Rs.10

Price of Y = Rs.5

Suppose, 

Units of X = a,

Units of Y = b

Now if the standard equation of budget line:

M = Px × Qx + Py × Qy

Then our budget line becomes,

100 = 10 × a + 5 × b
100 = 10a + 5b
Further we can draw the budget schedule and budget line using the x-intercept and y-intercept.
\[\begin{array}{rcl}\frac{100}{100} & = & \frac{10a}{100} + \frac{5b}{100} \\ 1 & = & \frac{a}{10} + \frac{b}{20}\end{array}\]
Therefore the coordinates to draw a budget line are (10 ; 0) , (0 ; 20)
The budget line can be shown as under

Budget Schedule:

a (Units of X)	b (Units of Y)
10	0
5	10
8	4
0	20