The slope of the budget constraint:
A)changes as the marginal rate of substitution changes.
B)is the ratio of the prices of the two goods.
C)is the ratio of the budget to total utility.
D)equals one, since the consumer can purchase any combination along the budget constraint.

Question

Quizplus · Accepted Answer

The slope of the budget constraint is determined by the ratio of the prices of the two goods. This is because the slope represents the opportunity cost of one good in terms of the other. As the price of one good increases relative to the other, the slope becomes steeper and the consumer can afford less of that good for each unit of the other good that they purchase. Therefore, the correct answer is B.

The Slope of the Budget Constraint