A firm's budget line shows a given expenditure on production, given the input prices for the production process.

Question

Quizplus · Accepted Answer

A budget line shows the different combinations of two goods that can be purchased with a given amount of income, and given the prices of the two goods. It does not directly relate to input prices for production. However, in the context of production, a firm's budget line would show the different combinations of inputs that can be purchased with a given budget, given the prices of the inputs.

A Firm's Budget Line Shows a Given Expenditure on Production