Consider a consumer with income Rs 100. There are two commodities 1 and 2 to choose from. If the consumer spends all his income on good 1, he can buy 5 units of it. If he spends all his income on good 2, he can buy 20 units of it. Based on the given information, attempt the following:
Sure, let's break this down step by step.
1. Budget Line: The budget line represents the various combinations of goods that a consumer can purchase given their income and the prices of the goods. In this scenario, if the consumer spends all income on good 1, they can buy 5 units. If all the income is spent on good 2, they can buy 20 units.
- Price of good 1: Rs 100 / 5 units = Rs 20 per unit
- Price of good 2: Rs 100 / 20 units = Rs 5 per unit
2. Equation of the Budget Line: The equation of the budget line can be represented ____ __________ _______ ____ _____ ____.
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