Suppose you only consume food and clothing, and clothing is plotted on the vertical axis. Also, you purchase food at a fixed price (P_F), but the price of clothing declines as you buy in larger quantities (i.e., quantity discounts). What does the budget line look like in this case?

Question

Quizplus · Accepted Answer

The declining price of clothing with larger quantities purchased means that the budget line will be bowed in towards the origin, creating a convex shape. This is because as the quantity of clothing purchased increases, the price of clothing decreases, allowing for a larger quantity of clothing to be purchased within the same budget constraint. Therefore, the budget line will be convex to the origin.

Suppose You Only Consume Food and Clothing, and Clothing Is