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Author Question: What information do you need to draw your budget line? What is your budget line? What does it show ... (Read 92 times)

Mr. Wonderful

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on: Jun 29, 2018
What information do you need to draw your budget line? What is your budget line? What does it show for any pair of goods?
 
  What will be an ideal response?

Question 2

Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city of Lucknow. When a marginal cost pricing rule regulation is imposed, the price per household per month is ________.
 
  A) 30 and 20,000 household are served
  B) 10 and 40,000 household are served
  C) 10 and 20,000 household are served
  D) 20 and 30,000 households are served


ankilker

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Reply #1 on: Jun 29, 2018
Answer to Question 1

To draw a budget line for any pair of goods, you need to know your income and the price of each good. The budget line shows all combinations of the two goods that you can afford. The slope of the budget line is the ratio of the prices and shows, therefore, the rate at which the market requires you to give up some of one for more of the other.

Answer to Question 2

B


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