Multiple choice

The maximum amount of goods - X the consumer can buy (by using the budget line) where M is his money income is given by

  1. M / Px

  2. M / Py

  3. Px / M

  4. Py / M
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The budget line equation is M = Px·X + Py·Y, where M is income. To find maximum X, set Y = 0 (spend nothing on Y): M = Px·X, so X = M/Px. This is the x-intercept of the budget line, representing maximum affordable quantity of good X if the consumer spends all income on X. Option A correctly states this formula.

Keep practicing — related questions