Given the budget equation 5M + 10P = 100, where M represents movies and P repres

Question

Given the budget equation 5M + 10P = 100, where M represents movies and P represents pizza, the slope of the budget line is the relative price of one good in terms of the other the price of good M the price of good P dependent upon the quantities of the goods consumed Lizzie's preferences are shown in the figure below Lizzie is just as happy to have as she is to have. 6 comic books and 6 cookies. 5 comic books and 13 cookies. 2 comic book and 12 cookies; 8 comic books and 8 cookies 4 comic books and 8 cookies; 6 comic books and 12 cookies. 2 comic books and 12 cookies; 4 comic books and 8 cookies.

Explanation / Answer

1. A) The relative price of one good in terms of the other.

(The slope of the budget line represents the amount of “Y” axis the consumer must give up to purchase one more unit of a good “X.”)

2. C) 4 comic books and 6 cookies; 6 comic books and 12 cookies.

(the preference of books to cookies is 1:2)

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