3. Young Alasdair loves lollipops and hates oatmeal. To induce him to eat enough

Question

3. Young Alasdair loves lollipops and hates oatmeal. To induce him to eat enough oatmeal and to restrain him from eating too many lollipops, his mum pays him 10 pence for every quart of oatmeal that he eats. The only way that he can get lollipops is to buy them at the sweet shop, where lollipops cost 5 pence each. Besides what he earns from eating oatmeal, Alasdair gets an allowance of 10 pence per week. If Alasdair consumes only oatmeal and lollipops and if his consumption bundles are graphed with quarts of oatmeal on the horizontal axis and lollipops on the vertical axis, then Alasdair's budget line has a slope (a) of 2; (b) of less than -2; (c) of -2; (d) of 1/2; (e) greater than 2.

Explanation / Answer

Answer : As we know Slope of budget line is equal to the price of two goods. Basically, Budget line shows the combination of two goods which can purchased with a given income and prices.

Slope of Budget Line = - Price of Oatmeal / Price of Lollipops

Here , price of oatmeal = $10 and price of lollipop = $5

Slope of Budget line = -10/5 = -2

This shows the slope of budget line is equal to -2

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