Which of the following is a correct representation of the budget constraint in a world with only food and shelter, where M = income, = price of food, = shelter price, S = the quantity of shelter, and F = the quantity of food.
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Which of the following is a correct representation of the budget constraint in a world with only food and shelter, where M = income, P_f = price of food, Pₛ = shelter price, S = the quantity of shelter, and F = the quantity of food. (A) M = P_f(S) + Pₛ(F) (B) F = M/Pₛ - P_f/Pₛ(S) (C) S = M/Pₛ - Pₛ/P_f(F) (D) None of the above is correct.
Also written as: Which of the following is a correct representation of the budget constraint in a world with only food and shelter, where M = income, P_f = price of food, P_s = shelter price, S = the quantity of shelter, and F = the quantity of food.
Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.
This question is on Budget set and budget line, part of Budget constraint and consumer equilibrium in Microeconomics.
Which bundles a consumer can afford, the slope of the budget line, and how income and price changes shift it.
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Question from the UoH 2010 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.