[amp_mcq option1=”Has a slope equal to the relative price” option2=”Shows the limit what can be consumed” option3=”Rotates and shifts only when the consumer budget changes” option4=”Both A and B are correct” correct=”option4″]<\/p>\n
The correct answer is D. Both A and B are correct.<\/p>\n
A budget line is a line that shows all the combinations of goods and services that a consumer can afford to buy with a given amount of money. The slope of the budget line is equal to the relative price of the two goods. This means that the amount of one good that the consumer can afford to buy decreases as the price of that good increases. The budget line rotates and shifts only when the consumer budget changes. This means that if the consumer’s income increases, the budget line will shift outward, and if the consumer’s income decreases, the budget line will shift inward.<\/p>\n
Here is a diagram of a budget line:<\/p>\n
The budget line is represented by the line AB. The consumer can afford to buy any combination of goods that lies on or below the budget line. For example, the consumer could buy 10 units of good X and 0 units of good Y, or 0 units of good X and 10 units of good Y, or any combination in between. However, the consumer cannot afford to buy any combination of goods that lies above the budget line. For example, the consumer cannot afford to buy 15 units of good X and 5 units of good Y, because this combination would cost more than the consumer’s budget.<\/p>\n
The slope of the budget line is equal to the relative price of the two goods. This means that the amount of one good that the consumer can afford to buy decreases as the price of that good increases. For example, if the price of good X increases, the budget line will rotate inward, and the consumer will be able to afford to buy less of good X.<\/p>\n
The budget line shifts only when the consumer budget changes. This means that if the consumer’s income increases, the budget line will shift outward, and if the consumer’s income decreases, the budget line will shift inward. For example, if the consumer’s income increases, the consumer will be able to afford to buy more of both goods, and the budget line will shift outward.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Has a slope equal to the relative price” option2=”Shows the limit what can be consumed” option3=”Rotates and shifts only when the consumer budget changes” option4=”Both A and B are correct” correct=”option4″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-58829","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n