<p>:)</p>

<p>A person is endowed with $(x,y) = (0,10)$ units. Suppose, price of $x$ is $p_x$; price of $y$ is $p_y$ . So, the income of the consumer = $10 p_y$</p>

<p>And the corresponding budget constraint will be: $x p_x + y p_y = 10p_y$</p>

<p>Vertical intercept $(0, y) = (0,10)$ and horizontal intercept $(x, 0) = \left( \displaystyle\frac{10p_y}{p_x}, 0\right)$</p>

<p>Now suppose <strong>$p_y$ is increased to $p_y'$</strong>. </p>

<p>New budget line will be : $x p_x + y p_y' = 10p_y'$</p>

<p>Vertical intercept $(x = 0, y) = (0,10)$ which is same as the previous case.</p>

<p>And horizontal intercept $(x, 0) = \left( \displaystyle\frac{10p_y'}{p_x}, 0\right) &gt; \left( \displaystyle\frac{10p_y}{p_x}, 0\right) $ because $p_y' &gt; p_y$</p>

<p>Therefore, the new budget line has become flatter with the same vertical intercept.</p>

<p>The graph looks something like this:
<a href="https://i.sstatic.net/PDun2.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/PDun2.png" alt="enter image description here"></a></p>

CC BY-SA 3.0
2017-04-20T13:24:24.870Z
2017-04-20T13:24:24.870Z
Nidhi Jain
<p>I'm studying for a microeconomics midterm and ran across the following question: </p>

<p>A person consumes two goods, X and Y. The consumer's only source of income is given by the quantity of Y equal to ten, which he can sell on the market at the existing price.</p>

<p>What would the budget constraint look like? What would it look like if the price of Y increases?</p>

<p>I initially drew the curve with a downward slope until it hits Y=10 on the Y-axis then it becomes vertical down to the X-axis. Can it look like this given that the question doesn't specify how much of X is being consumed?</p>

<p>Thank you in advance. </p>

<microeconomics>
Budget constraint when one of the goods can be sold
Irene Castañeda
# Budget constraint when one of the goods can be sold

(Asked by: username_0 on 2017-04-20)

I'm studying for a microeconomics midterm and ran across the following question:

A person consumes two goods, X and Y. The consumer's only source of income is given by the quantity of Y equal to ten, which he can sell on the market at the existing price.

What would the budget constraint look like? What would it look like if the price of Y increases?

I initially drew the curve with a downward slope until it hits Y=10 on the Y-axis then it becomes vertical down to the X-axis. Can it look like this given that the question doesn't specify how much of X is being consumed?

Thank you in advance.

**Tags:** microeconomics


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## 1 answers

### Answer by username_1 on 2017-04-20. Score: 1 | Accepted answer

:)

A person is endowed with $(x,y) = (0,10)$ units. Suppose, price of $x$ is $p\_x$; price of $y$ is $p\_y$ . So, the income of the consumer = $10 p\_y$

And the corresponding budget constraint will be: $x p\_x + y p\_y = 10p\_y$

Vertical intercept $(0, y) = (0,10)$ and horizontal intercept $(x, 0) = \left( \displaystyle\frac{10p\_y}{p\_x}, 0\right)$

Now suppose **$p\_y$ is increased to $p\_y'$**.

New budget line will be : $x p\_x + y p\_y' = 10p\_y'$

Vertical intercept $(x = 0, y) = (0,10)$ which is same as the previous case.

And horizontal intercept $(x, 0) = \left( \displaystyle\frac{10p\_y'}{p\_x}, 0\right) > \left( \displaystyle\frac{10p\_y}{p\_x}, 0\right) $ because $p\_y' > p\_y$

Therefore, the new budget line has become flatter with the same vertical intercept.

The graph looks something like this:
[![enter image description here](https://i.sstatic.net/PDun2.png)](https://i.sstatic.net/PDun2.png)


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