Question

Kate earns $300/week which she spends entirely at the grocery store where she buys either food (F) or alcohol (A). Let XF represent the quantity of food Kate purchases, and XA the quantity of alcohol.

Let PF = $1 and PA = $3. Illustrate Kate’s budget constraint (place XF on the horizontal axis). What is the vertical value of the vertical intercept for your budget constraint? (Please enter only a number).

Answer 1

Budget constraint = 1XF + 3XA = 300

The straight line is the budget constraint of Kate.

The vertical point at which budget constraint touches the Y-axis is 100 (vertical intercept). As the price of alcohol of $3, maximum units of alcohol Kate can purchase is 100 units while maximum units of food can be purchased is 300 units.

XAN 1xf+3XA=300 100 300 北