What is true of the budget constraint line?

What is true of a budget constraint? A. It is a legal limit on how much individuals may spend without going into bankruptcy.

What does the budget constraint line show?

In a budget constraint, the quantity of one good is measured on the horizontal axis and the quantity of the other good is measured on the vertical axis. The budget constraint shows the various combinations of the two goods that the consumer can afford.

What does a budget constraint show quizlet?

What does the budget constraint show? the various combinations of goods the consumer can afford given his or her income and the prices of the two goods. consumer budget constraint.

Which of the following describes a budget line?

Which of the following describes a budget line? A curve showing various combinations of two products a consumer can purchase with a specific amount of income.

What does the slope of the budget constraint line equal?

Budget Constraints in General



It also states that the slope of the budget constraint is the negative of the price of the good on the x-axis divided by the price of the good on the y-axis.

What are the properties of budget constraint?

Properties of budget line



Budget line is a straight line. Budget line has a negative slope. The slope of the budget line is negative of the price ratio. Budget line is tangent to indifference curve.

What are the main determinants of budget line?

The determinants of budget line are money income of the consumer, price of good 1 and price of good 2.

What does every point on a budget line graph represent quizlet?

What does every point on a budget line graph represent? All combinations of goods that can be purchased with a given income.

What is the consumer budget line quizlet?

a consumers budget line shows all the combinations of two goods that exhaust the budget. Budget Set. a consumers budget set is the set of affordable combinations of two goods.

Does the budget constraint implies there is an opportunity cost when choosing between two goods?

A budget line (budget constraint) shows the various combinations of two goods that a consumer can purchase with a specific money income. Straight-line budget constraints imply constant opportunity costs for both goods.

What is the budget constraint equation?

It’s saying that the price of the good on the x-axis multiplied by that same good’s quantity, plus the price of the good on the y-axis multiplied by its own quantity, is equal to income.

What happens to the budget line when price increases?

If the price of Product A increases, the maximum quantity of Product A decreases at this income level, pushing the budget line inwards towards the origin. An increase in money income shifts the budget line outward to the right.

What happens to the budget line when income increases?

When there is an increase in income, a consumer can buy more of both goods and this shows an outward i.e. rightward shift in the budget line. On the other hand, when there is a decrease in income, the consumer’s consumption possibility decreases, and the budget line shifts inwards.

What is the importance of a budget line?

A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.

Why budget line is straight line?

The slope of this line is equal to the ratio of the prices of these goods. Since the prices of the two goods are constant, the slope of the budget line is also constant. Hence, the budget line is a straight line.

Which of the following can be stated as potentially true about any economy quizlet?

Which of the following can be stated as potentially true about any economic? Its current choice of positions its production possibilities frontier helps determine its future location.

What does each point on the production possibilities curve represent quizlet?

Every point on the production possibilities curve is a point of efficiency. When we cannot produce more of any one good without giving up some other good, we have achieved productive efficiency, and we are producing at a point on the PPF. service is the opportunity cost of producing one more unit of it.

Which statements best describe the combinations of goods that lie on the production possibilities curve quizlet?

Which statement best describes combinations of goods that are beyond the production possibilities curve? They are unattainable.

How do you read a budget constraint graph?


Quote from video: This value right here where the budget constraint touches the y-axis where we're measuring. Water in number in number of cases is the amount of income toby has divided by the price of water.

What does the budget constraint framework suggest when income rises?

The budget constraint framework suggest that when income or price changes, a range of responses are possible. When income rises, households will demand a higher quantity of normal goods, but a lower quantity of inferior goods.

Does budget line indicate price ratio?

Answer. The Budget line indicates the combination of goods a consumer can purchase given his or her income and the prices in the market. Any bundle above the budget line cannot be achieved as it cost more than the consumers income. However a bundle below the budget line cost less than the consumers income..

What is budget line and its graph?

Budget line is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer.

What is the importance of a budget line?

A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.

Why budget line is straight line?

The slope of this line is equal to the ratio of the prices of these goods. Since the prices of the two goods are constant, the slope of the budget line is also constant. Hence, the budget line is a straight line.