Derive the budget line equation for the case where good 2 is a composite good. What is the vertical intercept and what is the slope?

What will be an ideal response?


Since p2 = 1, the usual budget line equation x2=I/p2- (p1/p2)x1 becomes x2=I- p1x1, an equation with a vertical intercept of I and a slope of - p1.

Economics

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