Joe spends $72 on gasoline and sandwiches. The price of a gallon of gasoline is $3 and a sandwich is $4
Placing the quantity of sandwiches on the left side, what is Joe's budget equation? If sandwiches are measured on the vertical axis, what is the slope of Joe's budget line?
The budget equation is QS = 18 - 0.75QG, where QS is the quantity of sandwiches and QG is the quantity of gasoline. To determine the slope of Joe's budget line, first notice that Joe's budget line intersects the vertical axis when Joe buys 18 sandwiches (which equals his income, $72, divided by the price of a sandwich, $4). Second, Joe's budget line intersects the horizontal axis when he buys 24 gallons of gasoline (which equals his income, $72, divided by the price of a gallon of gasoline, $3). So calculating the slope of Joe's budget line over the horizontal distance from 0 gallons of gasoline to 24 gallons of gasoline, the slope equals the vertical fall is -18 sandwiches divided by the horizontal distance of 24 gallons of gasoline, so the budget line's slope of -18 sandwiches/24 gallons of gasoline, which is -0.75 of a sandwich per gallon of gasoline.
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