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Example of Budget Lines and Indifference Curves

See the attached diagram. A consumer is in equilibrium at point A. The price of good X is $5.
a) What is the price of good Y?
b) What is the consumer's income?
c) At point A, how many units of good X does the consumer purchase?


Solution Preview

a) The red line shows the consumer's budget line. He can afford either 20 units of product X or 20 units of product ...

Solution Summary

Given a consumer's budget line and indifference curves, calculate:
- the price of one of the goods
- the consumer's income
- the quantity of each good that the consumer purchases