18. Recall that Jim initially had $80 per month to spend on goods X and Y. The initial price of X was $1 and the price of Y is $2. The price of X then rose to $2. What is the value of B on the graph to the right?.

   B is vertical intercept of the compensated budget. This is the amount of good Y that could be purchased on the compensated budget if nothing else were bought, or the compensated income divided by the price of Y.

   We compensate our consumer by the amount of X originally consumed (50) times the increase in price ($1) so compensation = $50. Thus, the compensated income = $80 + $50 = $130. Since Y sells for $2 per unit the vertical intercept is $130 ÷ $2/unit = 65 units.

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