The Budget Constraint for a Consumer Who Only Buys Apples

question 42

Multiple Choice

The budget constraint for a consumer who only buys apples (A) and bananas (B) is P_AA + P_BB = I where consumer income is I, the price of apples is P_A, and the price of bananas is P_B. To plot this budget constraint in a figure with apples on the horizontal axis, we should use a budget line represented by the slope-intercept equation:

• A) A = -I/P_A + (P_B/P_A)B
• B) A = I/P_A - (P_B/P_A)B
• C) B = -I/P_B + (P_A/P_B)A
• D) B = I/P_B - (P_A/P_B)A

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Definitions:

Raw Materials Inventory

This represents the stock of basic materials awaiting to be processed into finished goods.

Work in Process

Inventory that includes all the materials, labor, and overhead costs for products that are in the production process but not yet completed.

Finished Goods Inventory

Inventory of finished goods available for sale but still unsold.

Fire Insurance

An insurance policy that provides coverage against losses or damages caused by fire.