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:

Diversification-for-Stability

A strategy aiming to reduce risk by allocating investments among various financial instruments, industries, or other categories.

Self-sufficient

The ability of an entity or individual to meet all of its needs without external assistance.

GATT

The General Agreement on Tariffs and Trade, a multilateral treaty aimed at reducing trade barriers and promoting international trade through the reduction of tariffs and quotas.

World Trade Organization

An international organization designed to regulate and facilitate international trade between nations.