The budget lineL
A)represents the set of all baskets the consumer can afford.
B)represents the set of all baskets the consumer can afford while spending all available income.
C)represents the set of all baskets that give the consumer the same level of utility while holding spending constant.
D)represents the set of all baskets in which the consumer purchases only one of the goods.

Question

Quizplus · Accepted Answer

The budget line represents the combination of goods a consumer can afford to purchase while spending all of their available income, given the prices of the goods. Therefore, option B is the best choice. Option A is incorrect because the budget line represents affordable baskets under the assumption that all available income is spent. Option C is incorrect because it refers to the indifference curve, not the budget line. Option D is incorrect because the budget line does not represent purchasing only one of the goods. The budget line represents the set of all baskets the consumer can afford while spending all available income. It shows the different combinations of two goods that a consumer can purchase with their income at given prices. The slope of the budget line represents the relative price of the two goods, and the budget line itself represents the maximum affordable combinations of the two goods.

The Budget LineL