A consumer has $1,000 a week to spend on renting square feet of housing (at a price of $5 per square foot) and eating out (at a price of $20 per meal). With square feet of housing on the horizontal and meals on the vertical axis, what is the vertical intercept and what is the slope of this consumer's budget constraint?
What will be an ideal response?
The most meals that can be consumed with $1,000 is 50 per week --- implying a vertical intercept of 50. The most square feet that can be rented with $1,000 per week is 200, implying a horizontal intercept of 200. The slope is then -50/200=-1/4.
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What will be an ideal response?