Suppose there are two goods,X and Y,with X measured on the horizontal axis and Y measured on the vertical axis.Which of the following statements about a budget line relating the two goods is correct?
A)The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income and prices.
B)The budget line shows all the possible combinations of X and Y a consumer can buy given the level of income,prices,and borrowings.
C)The budget line shows the most preferred combinations of X and Y a consumer can buy given the level of income and prices.
D)The budget line shows the least-cost combinations of X and Y a consumer will buy given the level of income and prices.

Question

Quizplus · Accepted Answer

A budget line represents all the possible combinations of two goods that a consumer can buy given their income and the prices of the goods. The line shows the different quantities of good X and Y that can be purchased with a given income. The slope of the budget line represents the ratio of the prices of the two goods.

Suppose There Are Two Goods,X and Y,with X Measured on the Horizontal