Question
Hello, please, answer this question for the basics of the economics course. You need to allocate amonetary budget of w euros between gigabytes of data
Hello, please, answer this question for the "basics of the economics" course.
You need to allocate amonetary budget ofweuros between gigabytes of data per month ofdata transfer on a smartphone (x-axis) and all other consumption (ony-axis).
The simplest pricing scheme allows you to buy any numberxof GB per month at a fixed price ofpeuros per GB (prices and GB are in monthly terms).
How many GB can you buy if you use your entire budget on GB? Of course, you may choose not to buy any GB at all and in this case, you can use your budget on other consumption.
Equation of the budget line is:w = pxx + pyy
where
- w:available budget
- pxandx: price and quantity of goodx
- pyandy: price and quantity of good y
To draw the budget line, start from the intercepts of the x and y axes (we read amount of goodxon the x-axis and amount of goodyon the y-axis):
- How much of good x can I get if I spend all my budgetwon it:=+0=/
- How much of good y can I get if I spend all my budgetwon it:=0+=/
Your task is to draw the set of feasible choices of (x, y), i.e. combinations ofxGB of data transfer andyeuros of other consumption such that you do not exceed your total budget for the case wherew= 10 andp= 2. The maximum number of GBs that can be bought is5.If bought 0 GB, the budget of 10 can be spent on other goods.
The line joining the two points shows all the combinations of goodxand goody(bundles) that you can afford. All the points above and on the right of the line are unaffordable bundles. All the points below the line are affordable but will leave some of the budget not spent, which is not desirable.
On which point does the budget line cross the x-axis and y-axis (the extremes of the budget line)? Write the answer in the answer box as (0,y);(x,0).
Euros (E) O 0 Gigabytes (GB)Step by Step Solution
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