1. A person has $ 100 to spend on two goods X and Y whose respective prices are $3 and $5.
A. Draw the budget line.
To draw the budget line, we need to plot the different combinations of goods X and Y that the person can afford with their given budget of $100.
Let's assume that the x-axis represents the quantity of good X and the y-axis represents the quantity of good Y. Since good X costs $3 and good Y costs $5, we can calculate the maximum quantity of each good that can be bought with the given budget.
The maximum quantity of good X that can be bought is $100 ÷ $3 = 33.33 (rounded down to 33).
The maximum quantity of good Y that can be bought is $100 ÷ $5 = 20.
Now we can plot these points on the graph:
Point A: (33, 0) - This point represents buying only good X with the entire budget.
Point B: (0, 20) - This point represents buying only good Y with the entire budget.
Point C: (0, 0) - This point represents not buying any of the goods.
Connecting these points will give us the budget line.