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Math Help - Calculating the budget line equation

  1. #1
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    Sep 2011
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    Calculating the budget line equation

    Johnís income is $100 a week, CD is $10 each and price of a book is $20. Johnís utility is represented by figure 1 below. (DO NOT assume U=XY)
    a. What is the equation for Johnís budget line?
    b. Graph Johnís budget line

    Here is my work:
    10Qcd + 200b = 100
    Qcd + 200b / 10cd * Qqb = Y / 10cd
    Qcd = y/10cd - 200b/10cd * Qb
    100/10 cd - 200/10 cd * Qb
    Qcd = 10 - 20Qb


    Where do I go from here to find out the budget equation and the coordinates to graph the budget line?

    Thankyou!
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  2. #2
    MHF Contributor
    Joined
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    Re: Calculating the budget line equation

    you typoed but apart from that have pretty much written the answer on the first line.
    10Q_{cd} + 20Q_{b} = 100


    this is the equation of a line which you can plot. if you want to find two points to connect, try substituting values:
    Q_{cd}=0 \rightarrow Q_b = 5 this gives you a point

    Q_b=0 \rightarrow Q_{cd} = 10 this gives you a point


    in the following, i used C as quantity of CDs and B as quantity of books.
    plot 10C + 20B = 100 - Wolfram|Alpha

    the wolfram plot goes into negative values. you probably should not do this.
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