Good Y 15 Good X The graph above shows a budget constrain fo

Good Y 15 Good X The graph above shows a budget constrain for a consumer with a voucher for Good X. In addition to the voucher, the consumer has a budget of their own money of $10. Determine the dollar amount of the voucher. (Do not include a $ sign in your response. Round to the nearest two decimal places if necessary.)

Solution

The consumer has an income of $10 which he spents entirely on good Y without a voucher. This means he purchases good X only when he was given a voucher for it.

A voucher for Good X is much like a cash gift. However, since a voucher has to be spent only on Good X, hence the intercept for good Y remained the same at 10.

If we extend the straight line from 15 units of Good X backwards to touch the Y -axis, it will intersect the Y-axis at 20. This means that the voucher amounts to $10 of Good X ( 20-10)$