Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8 respectively. How much is the consumer’s income?
Budget line – P1X + P2Y = M
Where,
P1 – Price of Good 1 = 6
P2 – Price of Good 1 = 8
M – Income of consumer = ?
X – Units of Good 1 = 6
Y - Units of Good 2 = 8
M = (6 × 6) + (8 × 8) = 36 + 64 = 100
Therefore, the income of consumer is Rs 100