Write out the linear budget equation

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Reference no: EM131238719

Assume that the world price of one unit of Flower (P_F) is $2 per unit and the world price of a unit of Bread (P_B) is $2 per unit and the citizens of the Home Country has a budget amount R = $1,600 million to spend on these two goods. Assume quantity of Flower is represented by the symbol F and the quantity of Bread is represented by the symbol B.

1. Using the information above, write out the linear budget equation and then solve it in terms of flowers (F) as a function of Bread (B).

2. Using the budget equation in the derived form and expressed in terms of F on the left hand side of the equation, draw the linear budget line in Figure 1 with Flowers (F) on the vertical scale and Bread (B) on the horizontal scale and Label it as Pw line. Calculate the slope of the PW line and explain what does it mean?

Reference no: EM131238719

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