Neha's available income each week for expenditures on food and clothing is $40. The price of each unit of food is $2 (good 1) and the price of each unit of clothing (good 2) is $10.

 a. Give the definition and formula for the budget line. 

b. Give the equation for Neha's budget line. 

c. Draw a graph of Neha's budget line with food on the x-axis and clothing on the y-axis. Label the intercepts. 

d. For each of the consumption bundles in the table, identify whether the bundle is on Neha's budget line, inside Neha's budget line, or beyond Neha's budget line. Illustrate the bundles on your graph. For each bundle state whether it is potentially optimal for Neha, and why or why not. Consumption bundle (food, clothing) On, inside, or beyond the budget line (5, 3) (4, 4) (10, 1 

e. Calculate the slope of the budget line. Explain the concept that this slope represents.

Answer rating: 100% (QA)

a Definition and Formula for the Budget Line The budget line represents the combinations of two goods that a consumer can purchase given their income ... View the full answer