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Question
A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.
Write down the equation of the budget line.
Solution
P1 = Rs 4
P2 = Rs 5
M = Rs 20
Equation of the budget line = P1x1 + P2x2 = M
4x1 + 5x2=20
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