Question

A consumer has income of $3,000.Winecosts$3 per glass, and cheese costs $6 per pound. Draw the consumer’s budget constraint. What is the slope of this budget constraint?

Short answer

The budget constraint is given below.

Step-by-step solution

Budget constraint

The budget constraint reflects the income limit; beyond that level, the consumer cannot consume. The maximum consumption of any product will be obtained when standing on the budget line.

The budget line equation will be.

The total income is $3,000. If all the income is spent on buying wines, then the number of full glasses of wine that can be bought will be 1000 glasses (=3000/3). Since the wine is measured on the vertical axis, the intercept of the vertical axis will be 1000.

Similarly, if all the income is spent on cheese, then the total pound of cheese that can be bought will be 500 pounds, i.e., (=3000/6). The horizontal axis intercept will be 500, where cheese is measured.

Slope of budget constraint

The budget constraint is given as follows:

The slope of the budget constraint is given as follows:

The slope will be -2.