A consumer’s budget line shows: a. combinations of two goods that are equally satisfying to the...
A consumer’s budget line shows:
a. combinations of two goods that are equally satisfying to the
consumer
b. combination of two goods that the consumer can buy if she spends
all of her income on them, given unit prices of the goods
c. combination of two goods that a consumer can produce over time
as her income increase, given unit prices of the goods
d. none of the above
Homework Answers
Option B is correct
Budget line is basically an equation that indicates all the bundles of two goods that are affordable to consumer with his given resources and the given prices of the two goods. The consumer can purchase any bundle that lies inside the budget set or lie on the budget line. They do not justify the satisfaction because utility is measured along the indifference curve and not on the budget line.
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