Question

Marie has a weekly budget of \(24, which she

likes to spend on magazines and pies.

If the price of a pie is \)12, what is the maximum number of pie she could buy in a week?

Short answer

Marie can buy maximum 2 units of pie with this money income

Step-by-step solution

Basic Concept

Budget Constraint shows the product combinations that a consumer can afford to buy, with given money income and prices.

Budget line shows the product combinations which fully spend the consumer's money income

The equation : when x & y are quantities of two goods & px, py are their respective prices, and m is money income : x px + y py = m

Detailed Explanation

The intercept of budget line shows the maximum quantity of a good, consumer can purchase with given money income & price.

Intercept Formula = Income / Price of the good

m / p i

• Here, maximum number of pies priced at $4, that can be purchased with income 24 = 24 / 12 = 2 units